D Is for Discipline

Hey Traders, Raghee here.

There’s a trading concept where the “D” in day trading really stands for discipline. Today, we’re gonna talk about the kind of discipline that I use every single trade. It’s a discipline that was developed through a lot of trial and error.

I’m gonna show you what it looks like today in terms of the NASDAQ… 

So, a couple things, first of all this is a one minute time frame of the NASDAQ that I look at when it comes to day trading.

I day trade off the 1 minute interval…

The other important thing is the setups, for the most part, come from two or three different things that I look for during the clearing period. One is the range of the clearing period itself, we need the high and the low that’s established between 9:30AM and 10AM Eastern time. That’s the clearing range (or opening range). 

The VScore: 

The high and low that’s established can also test the high and low of my VScore. The VScore is a tool that measures the volume weighted average price via standard deviations. So, those are two very simple visual tools that I use when I look for the highs and lows of those ranges, not just price. 

They are in the clearing range and also the VScore reading. 

So, we ended up with the VScore getting down to a level of support which shows that the market has basically wandered too far from its “normal” operating temperature. It’s like a bungee cord, the bungee cord got stretched, we wandered too far away, and what does the bungee cord do? 

It snaps.

The price action snaps the bungee jumper right back. Therefore, when we wander too far away, that’s a great level from which to expect support or resistance. In the case of getting down to the VScore low, that would be support, so we put on a trade there. 

Now, another thing that I do, when we talk about discipline, is we don’t expect the market to do anything beyond what it’s already done in recent memory.

Trading recent memories…

So when it comes to day trading (pretty recent memories) it’s the first 30 minutes of the day where we put in what’s known as the clearing range high. That’s the highest point, after the bell rang at 9:30am, that the price action was willing to go. Never should you place an initial target that’s beyond that. 

Your first target should respect that the market has been able to get to one level then stop just approximately after 10:45, that’s exactly what the market did. 

So the market got down to lows, those VScore lows, twice around the 13080 area. It got to 13080 to 13090 and then bounced up the clearing range high. Again, I don’t want to place a target outside of where the market has already recently gone.

Pay yourself while you can not when you have to…

That’s an initial target, the market pulls back. Then, once again, there it is, so this market was very generous. Twice we hit the clearing range high area around 13740. So remember that from 13680 to 13740 there was a nice 80 point move (70 to 80 point move) on the NASDAQ, 20 dollars per point… not too shabby. 

Then, if we overstay our welcome and don’t move our stop to a breakeven, in other words protect our downside (a.k.a. protect our capital), that morning we just kept hitting lower and lower and that’s what hurts a lot of traders.

What I call this is “Pay yourself while you can not when you have to.” This is discipline in day trading. I hope that you consider where you’re placing those initial targets and think about how you can get long from levels that embrace the low end of the range.

I’ll see you in the next update. 

Keep up with the volatility!

Sign up now to receive Raghee’s FREE Countdown Trader Newsletter. This is where Raghee walks you through timely trades and strategies. A great resource for all your trading needs.

We will never sell your information to any third parties.

Free Downloads

34 EMA Wave, GRaB Candles & Darvas 2.0 Indicator Downloads

Identify trends, sentiment, momentum and key price levels with Raghee's free indicators.

TradeStation | ThinkorSwim

Propulsion Dots Indicator Download

A dynamic indicator based on the comparison of 2 EMAs in the form of buy and sell dots.

TradeStation | ThinkorSwim