Thursday, March 11, 2010

A Simple Question to Ask Early in the Trading Day

In the webinar, I discussed the transition from being a trading novice to becoming competent as a trader. One skill that is key to this development for day traders is early recognition of day structure. Go back to the morning briefing today and you'll see that I was starting the day with an anticipation of a range day that would be oscillating around the volume-weighted average price. We can see above that using VWAP as a point of orientation helped us lean toward selling the market above and buying below.

A simple question to ask during the trading day is whether we'll be trading toward or away from VWAP. That really is an issue of whether we'll be breaking out and trending, or whether we'll accept value within an established trading range. Having a good sense for day structure helps you set your strategy...and then successful trading is a matter of executing that strategy with the right tactics.