Do This To Get An Edge In The Pre Markets

by | May 22, 2020 | Editorial | 0 comments

Did you know that the odds of being called to “Come on down!” on The Price Is Right is 1 in 36?

I bet you didn’t know that the odds of having a winning day trading in the markets is about 1 in 100… or far less than a flip of a coin as first thought!  

And you don’t even want to know the odds of having a winning week, month, or year either!

Which is exactly why you need to have a trading plan that gives you an edge in the markets and puts the odds of winning closer to that flip of a coin, or 50/50!

Now go back to a trade that landed you those sweet profits… and let me ask you this …

Did that just happen due to luck or did you have a plan that you were able to put into action? Is this trade repeatable that you can do monthly?

Luckily, I don’t trade on luck, but instead on a well-defined edge that I use day in and out.

The strategy used is based around pre market momentum indicators and focuses on analyzing the global markets before placing a single trade.

And once all of the signals are aligned I execute my trade…and only according to my trading plan!

Then I channel my inner ‘Hannibal’ Smith and say… “I love it when a plan comes together!”

Now let’s make your trading plan come together and increase the odds of a successful trade!

 

Daily Deposits

 

Here at Daily Deposits, I designed a proprietary trading strategy to take advantage of pre market and intraday momentum.  

This strategy is built and designed to predict the market direction based on a proprietary set of pre market analytics.

But the real magic happens when you combine these signals with overnight support and resistance levels.  When you do this you get some of the most accurate trading signals out there!

Just by focusing on a few key indicators and pre market support and resistance, you can have the opportunity to make triple digit returns week after week!

In fact, even during a day of mixed market trading the system was able to pinpointed perfect opportunities to exit your trade (and even take a short trade if you wanted!)

Now let’s take a look at exactly how I got my trades off to capture huge profits.

 

Pre Market Analysis

 

I always start my mornings off by analyzing the global markets and pre market trading sessions.  

Why?

Well, I am looking for clues and hints towards what is going to happen in the upcoming trading day.  

Daily Deposits is based around a set of momentum indicators that have been put to the test in one of the hardest to trade markets in history.  

The pre market is broken into:

  1. The US pre market trends
  2. FX and the impact on the currency markets
  3. The global overnight outlook

But those are 3 of 6 key premarket indicators I review in order to get a better understanding of what’s about to come.

In order to get the best understanding of what’s exactly going on I use  6 pre market indicators to get a jump on the markets.

And I always start with a global overview and analysis of the US markets and world markets!

The US Markets

 

Now let’s take a look at the US markets in the morning trading session.

 

Source: Finviz.com

 

As we can quickly see, the US markets are pointing to a negative trading day coming up.  Most of the indices are red on the day, with some commodities such as oil and lumber pointing green.

 

The Forex Markets

 

So far, everything is pointing to a mixed open or risk off day.

Now let’s take a look at what the currency markets are telling us.

 

Source: Finviz.com

 

From the currencies we see a mixed market and we are not able to gain a clear picture of what the impact will have on the US in the trading day ahead.

 

The Global Markets

 

Next, let’s look at the global markets and see if we can uncover any signs of a trend that might impact the US markets when we open for trading at 4am.

 

 

And there is a similar story for the global markets as well.

A little bit mixed as asian markets are heading lower with some European markets green and others are red, with the US markets looking positive so far.  

 

Economic Numbers

 

And for the economic numbers, we will be focused on the unemployment claims as they have been rocking the news headlines lately.

 

 

The markets are sure to react to a possible and expected 2.4m increase of unemployment that brings the total to 40m unemployed workers since the coronavirus outbreak in February.

Now, let’s take a look at what the overnight price action is showing us in the markets.

 

The Overnight Price Action

 

Now that we understand and have a better overview of the global markets, FX, and economic information coming out, it is time to turn to analyzing the price action of the markets.

Here we will analyze the US equity markets in more detail for price action information that can help us with our trading decision for the day ahead.

Like many other traders, I believe that support and resistance levels are great indicators of future price action.

Let’s take a look at the charts and see what these levels can show you.

 

Source: Thinkorswim

 

As you can see, the markets bounced off of the 2942.50 to 2945 support zone about 3 times in the pre market session.  

And now that the markets are starting to head higher, the next area it should trade towards is the upper range that was determined by the post market highs of the day prior.

Now remember, support and resistance areas are zones more than they are exact prices…even though sometimes they act like they care about exact prices!

 

Support And Resistance Are Zones

 

And even though these are called lines, in reality, they are zones.

Why is that?

Because they are psychological levels that traders look to buy and sell stock at.  

Another way to look at this is….

For example, a new TV was recently released and has the newest features in the market.  The store you usually shop at is selling the TV for $500, but unfortunately it is sold out.  After looking around, the store next door is selling the same TV at $515.  

Would you not purchase this new TV you want because of the extra $15?

I doubt it.  

Chances are you would still buy the TV even though it is $15 extra….

And that is how support and resistance lines go too.  The area is more of a zone than it is a specific price level.  

In many cases, the markets will come close to the SR lines, or even overshoot this price at times.  

But the reversal will still usually occur in the opposite direction…And if you waited for the exact level, chances are you never entered this trade at all!

For example…

 

Source: Thinkorswim

 

How I Use Support And Resistance To Trade The SPY

 

Once the momentum pre market indicators are analyzed, you will want to look for support and resistance levels prior to placing your trade.

Here’s a trade I took the other day.

 

Pre Market Analysis

 

By looking at the 5 minute chart before the market opens you are able to learn a lot about how the traders are thinking.  

This analysis can give you a clear picture of what direction to trade the markets in the day ahead.

 

Source: Thinkorswim

 

Here are the key takeaways from the SPY in the overnight trading session.

  • The trend is neutral to bullish
  • The 10 ma > 20 ma
  • Market bounced 3 times off of the lower support level
  • There is a clearly defined resistance level the SPY is seeming to want to head towards

Pro Tip:  Support and Resistance levels act as magnets to the trade price until they are broken!

So before placing any trades it is always best to analyze what these indicators are telling you about the stock.

From the analysis above, we are going to be looking to place a long trade in the SPY.

 

The Trade Of Day

 

Now that pre market momentum has been identified along with critical resistance levels in the SPY… the next step is to prepare for the trade ahead.

One approach to contract selection is to use weekly or monthly options.  It’s important to make sure that they are more than a few days until expiration but less than two weeks.  

Pro tip:  At-the-money or out-of-the-money options are always selected, based upon the price of the contracts.  I usually never trade In-the-money options since I will not get the “kick” I want to make the trade worthwhile.

Once all of the information is reviewed, I place my Trade of the Day

 

 

The Trade Breakdown

 

So here’s what happened when we breakdown the trade decision further.

 

Source: Thinkorswim

 

There were multiple setups that occurred all at the same time to give us our Trade of the Day alert.

The Setup:

  • The market was showing a long entry coming into the open with the 10 ma > 20 ma from earlier pre market momentum analysis
  • The markets bounced off of the lower support within the first 5 minutes of the trading day
  • 5 minute opening range breakout to the upside gave us direction
  • Target exit seemed to be overnight pre market resistance at highs

And once all of the trading plans came together, we were able to enter and exit with profits!

 

 

Wrapping Up

 

The strategy that is used at Daily Deposits to find the Trade of Day is focused on intraday momentum.  

This strategy helps traders get in front of the markets by anticipating momentum based off of a custom set of pre market analytics.  

And when trading during periods of extremely high volatility – it’s always best to use stop levels that give your trade enough time and room to work.  

By focusing on a few key indicators and the pre market trading session you have the opportunity to make explosive returns!

Click here to join Daily Deposits now!

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