A Guide to PDH Trading: What It Means and How to Make Money Doing It

October 18, 2023

Blog & Resources

By Dan Taylor

You've likely heard the term "PDH trading" floating around trading circles. But what exactly does it mean? As traders, we're always on the hunt for strategies that give us an edge. With so many patterns, signals, and metrics at play, deciphering which strategies yield tangible results can be challenging. 

This article tackles the PDH trading meaning and its importance in the financial world. Why? Because understanding it can open doors to more informed, profitable trading decisions. We'll dive deep into the intricate world of PDH in trading and explore its close relationship with breakout trading.

Understanding the Basics: PDH vs. Breakouts

PDH, or Prior Day High, serves as a crucial metric in the world of trading. In essence:

  • PDH represents the highest price at which a security traded on the preceding day.
  • It acts as a benchmark for the current day's trading activity.
  • When a stock surpasses its PDH, traders view this as a potential bullish sign.

On the flip side, the concept of a breakout might already be on your radar. A breakout occurs when a stock moves beyond the resistance level it established during its consolidation period. Now, you might wonder, how do these two relate?

Imagine a stock that repeatedly tests but never surpasses its PDH. This becomes a significant resistance point. If and when it breaks above this PDH, we're essentially witnessing a breakout. Thus, while PDH in trading is a specific price point, its surpassing can signify a broader breakout trend.

In-Depth Exploration Of PDH Trading

Solely relying on PDH might not be your golden ticket to trading success. It's essential, yes, but shouldn't be the only arrow in your quiver. Here's why:

  • Markets are multifaceted. A single metric, no matter how significant, can't capture its complexity.
  • PDH serves as an excellent marker for potential breakouts, but always consider other indicators and market sentiments.

However, clearances above the PDH do offer potential entry signals, especially for those interested in swing trading. Such trades aren't about day-to-day fluctuations but focus on capturing gains in a stock within a span of a few days to weeks. So, PDH offers valuable insights for those looking to catch a stock's momentum early.

Diving Deeper: The Power of Opening Range Breakouts

Remember the opening range (OR) we touched upon earlier? It’s a linchpin concept in understanding PDH trading. The OR defines the range of highest and lowest prices during the initial minutes of the trading day. These minutes are loaded with information as traders react to overnight news and assess the previous day's patterns.

PDH plays a pivotal role here. It's an integral part of analyzing a stock's movement. If a stock surpasses its PDH within the OR, it's a strong indicator of its momentum for the day. Such data points, when combined with other indicators, can help traders make informed decisions and seize potential opportunities.

The Intricate Interplay of PDH and Volume

In the bustling world of stocks, volume plays a key role. Many say "volume precedes price," and there's a good reason for it. High volume signifies heightened interest in a stock, often indicating a larger move on the horizon.

Take PDH trading, for example. When a stock clears its PDH on a significantly high volume, it amplifies the signal's strength. This is a clear indication of strong buying interest, tipping the balance in favor of the bulls. So, while PDH provides the direction, volume offers the magnitude.

This synergy becomes even more vital in opening range scenarios. If the OR breaches the PDH with robust volume, the probability of a substantial move increases manyfold. Tools like MarketGauge's HotScans simplify the process, helping traders identify such golden opportunities in real-time.

Practical Insights: How to Approach PDH Trading

Now that you understand the relationship between PDH and volume let's explore how to make the most of it. Before diving in, always ensure:

  • You've studied the stock's historical PDH data.
  • The current day's move is not just a one-off event but aligns with broader trends.

Approaching PDH in trading requires:

  • Recognizing patterns: Patterns offer insights into potential future moves. For instance, if a stock repeatedly tests its PDH but doesn't clear it, a breakout becomes highly probable.
  • Factoring in other indicators: PDH is a significant tool, but not the only one. Blend it with volume, support, and resistance levels to get a comprehensive view.

The PDH full form in trading – Prior Day High – is more than just a technical term. It's a barometer of momentum and potential opportunities. Like any strategy, the magic lies in its application. So, always be on the lookout, and don’t shy away from using additional tools and indicators to sharpen your decision-making.

Master PDH and Other Core Concepts To Elevate Your Trading

We started this journey with a simple question: What is the PDH meaning in trading? As you've seen, it’s a pivotal tool that, when used rightly, can provide unparalleled insights into market dynamics.

The world of trading continually evolves. Old strategies fade, and new ones emerge. Yet, the importance of understanding core concepts like PDH remains undiminished. 

But remember, knowledge without action is like a car without fuel. It won't take you far.

To elevate your trading game:

  • Mastering Breakouts Guide: Dive deep into the world of breakouts and understand the strategies that seasoned traders use to capture market momentum.
  • Volume Analysis eBook: This piece demystifies the role of volume in trading, helping you decipher what's beneath those big green and red bars.

Both these MOFU pieces offer actionable insights to refine your strategies further. So, don't wait. Dive in, arm yourself with knowledge, and embark on your trading journey with confidence.