A Very Reliable “Buy The Dip” Setup

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Attention day traders and swing traders (options traders too)...

There’s a very effective calculated price level that can be used to anticipate intra-day breakouts and reversals in stocks, ETFs, and indexes when you use it correctly.

For example, when you combine this price level with MarketGauge’s Opening Range trading tactics…

You can easily identify the very reliable trade setup that I review in the video below.

This pattern can be used as a trade setup or to anticipate the market’s next move.

The calculated price level I’ve referring to is the Floor Trader’s Pivot. This is a standard indicator on most trading platforms.

It’s calculated based on the prior day’s price levels. The formula is:
(high + low + close) / 3.

There are additionally calculated support and resistance levels derived from this basic calculation, but I’m not going to cover them here. You can learn more about them under “pivots” in our glossary, and I’ll cover how to trade with these other levels in different posts.

In the spirit of keeping this post very focused, this setup is simply defined in two steps or conditions…

1. After a large range day in a chart that is set up to continue in the direction of that big range day…
2. Look for an Opening Range reversal where the Floor Trader Pivot is near your O.R. reversal level.

As you’ll see in the video, my example is looking to buy AMD bouncing off its upward sloping 50-day moving average after a bullish big range day.

Right after the big up day, I look for an entry as the stock retraces into the prior day’s range.

When you know this pattern, you’ll have:

• A well-defined plan for a good swing or day trade.
• A great low-risk trade entry.
• A tactic that enables you to be patient, and wait for the market to pull back a little instead of feeling compelled to buy (and overpay) during all the excitement of the big range day.
• A set of rules to help you avoid situations where the big range day reverses the next day and probably stops out the trend traders who followed the big range day.
• And more.

 

 

This is a very simple application Of the Opening Range that you can use right away.

If you like to learn more about the Opening Range and the many strategies and tactics it provides to make your trading easier and more profitable check out this free introductory training here and our AM Trader / OR Mastery programs.