The market has been challenging for investors in recent times, but if you arm yourself with some appropriate tools, then it is possible to make money is all types of market environments. The IRESS Trader platform with the D2MX Trading Tools plugin gives you access to wonderful array of tools.
The seasonal earnings reporting season is upon us and there have been some great opportunities to make money, using the Gap Trading method that I will discuss today.
Day trading is the establishing and exiting of a position in the one trading day. It requires a higher degree of vigilance because every tick counts in the money making process, but the beauty of this type of trading is that you have the opportunity to take advantage of compounding.
Compounding is one of the wonders of the world and Warren Buffet has used it to dramatic effect in getting the value of his investments to grow at spectacular rates. Successful day trading allows you to build on consistent profits, to enable you to build your position size and risk appetite.
The 30 Minute Breakout Trading System
The 30 Minute Breakout (30MBO) Trading System is a straightforward trading system that is directed by the price action of first 30 minutes of the trading session.
The rules of the 30MBO Trading System are straightforward:
• Scan for stocks that have gapped on open. In the current market these are often stocks that have just reported. Use the IRESS_Trader platform to scan for potential trades.
• Do not enter a trade until 30 minutes have elapsed from the start of the trading day.
• Record the High and Low of the trading range for the first 30 minutes.
• After the first 30 minutes, BUY if the stock price is trading above the high of the first 30-minute trading range.
• After the first 30 minutes, SELL if the stock price is trading below the low of the first 30-minute trading range.
• Set your initial STOP LOSS at a pre-determined level, established before you enter the trade.
• To EXIT use either a profit objective and/or trailing stop, to close your position. Depending on your risk profile you may want to take profits as the trade moves in your favour.
• Exit your trade either just before the market closes or in the end of the day auction.
• Trade only in liquid markets!
The 30MBO System
National Bank 30MBO Trade Example
NAB offered a couple of great trading opportunities after reporting on the 14th of August. On the day the report was released, the 30MBO system triggered Long Entry at $24.45 and you could have exited near the close at $24.85, up 1.6%.
On the following day the 30MBO system triggered again a Short Entry at $24.65 and you could have exited near the close at $24.25, up 1.6%.
Computershare 30MBO Trade Example
Computershare (CPU) has also offered a couple of great trading opportunities since reporting.
On the day of reporting, August 7th, the 30MBO system triggered a Long Entry at $7.87 and you could have exited near the close at $8.00, up 1.7%. The next day the 30MBO system triggered again a Long Entry at $8.16 and you could have exited near the close at $8.31, up 1.9%.
Of course the 30MBO system will not always work, as was the case for CommBank where the trade on the day of reporting, 15 August, would have closed out at a slight loss.
• Only trade liquid stock. I would recommend sticking to ASX Top 20, but you may expand your trading universe to the ASX Top 50, depending on your leverage and risk tolerance.
• Use the Analyser tool in the IRESS Trader platform to scan for potential trades.
• Use compounding of profits to adjust your trade size once you are comfortable with the 3MBO Trading System.
• Take advantage of the MINI trading warrants. Subscribe to the D2MX Daily Trading Report for trading ideas and contact us on 1300 610 024 if you want to trade these ideas.
• It is best to trade this system when there is a catalyst for the stock, such as earnings or corporate news, which adds to the liquidity of the stock.
• Always know when you are wrong – before you enter the trade!
• Use profit objectives to take part profits as the trade progresses.
• Place your initial STOP at the bottom of the first 30 minutes trading range, or if that is too far from the entry price use 50% of the 30 minute trading range.
• Use a 20 minute chart to fine tune your trade.
• The system can be fine tuned by introducing a Stop and Reverse feature to the system.
There are plenty of ways to make money in the market and with the way many stocks move around earnings or corporate news events, the market gives nimble traders opportunities to make money through day trading.
The 30MBO Trading System is just one of a number of trading systems that can be used for this type of trading. We have presented this system in its simplest form and if you would like to know more, refer to Jake Bernstein’s book, The Compleat Day Trader, on the subject. In future articles we will discuss other day trading methods, which can revolve around the previous close, the day’s open and/or low for 30 to 60 minutes.
Utilise the features in the IRESS Trader platform to select your trades, according to your market view. You will save time and potentially increase your returns by trading with the trend.
Contact me at D2MX Trading on 1300 610 024 and I can help you trade using a number of strategies that will give you the tools to navigate this market and help you boost your returns on investment.
To subscribe to the D2MX Daily Trading Report or call 1300 610 024.
This report was prepared by Michael Hevern. It represents the views and opinions of the author. It is not intended for use by any third party, without the approval of Michael Hevern. While this report is based on information from sources which are considered reliable, its accuracy and completeness cannot be guaranteed. Any opinions expressed reflect my judgment at this date and are subject to change. Contracting Hevern Pty Ltd is a Corporate Authorised Representative No. 408868 of D2MX Pty Limited ABN 98 113 959 596, AFSL No. 297950 (D2MX), and Michael Hevern has been appointed as an Authorised Representative of Contracting Hevern Pty Ltd. Opinions, conclusions and other information expressed in this report are not given or endorsed by D2MX, unless otherwise indicated. The information contained in this Report is General Advice only, as the information or advice given does not take into account your particular objectives, financial situation or needs.
Disclaimer: Using leverage to invest can be a two edged sword, as it can magnify your returns when the stock price rises, but will in turn magnify the losses if the trade does not perform as expected.
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The D2MX Financial Advisory Services offers general advice on trading options to generate consistent steady income on your investment portfolio. Call 1300 610 024 for further information.