Mastering High Probability Day Trades: A Comprehensive Guide

MN Trading
MN Trading
Published in
5 min readAug 8, 2023

When it comes to day trading, identifying high probability trades is the key to success. Traders ask themselves fundamental questions: Where is the price likely headed — higher or lower? At what level can we expect a reversal or continuation? And how can we profit from these movements? In this article, we will explore a systematic approach to identifying high probability day trades.

1. Focus on Higher Time Frame (HTF) Daily or 4H Direction

The first step in our analysis is to prioritize the HTF Daily or 4H direction. When the Daily and/or 4H direction is bullish, we consider the following strategies:

  • Use the Previous Day’s Low to High for Retracement Entries.
  • Use the Previous Day’s New York Session Low to High for Retracement Entries.
  • Use the Previous Day’s Low for executing a Sell Stop Raid to accumulate long positions.
  • Pay attention to the move from HTF Discount to Premium Price Distribution (PD) Arrays.

On the other hand, when the Daily and/or 4H direction is bearish, we implement the following strategies:

  • Utilize the Previous Day’s High to Low for Retracement Entries.
  • Utilize the Previous Day’s New York Session High to Low for Retracement Entries.
  • Use the Previous Day’s High for executing a Buy Stop Raid to accumulate short positions.
  • Pay attention to the move from HTF Premium to Discount PD Arrays.

2. Consider Previous Day’s London Session

In addition to the HTF analysis, we also examine the previous day’s London session highest high and lowest low, as well as the London session high and low prior to the New York session. These price levels can offer valuable insights into potential retracements and stop raids.

3. Utilize IPDA Data Ranges with PD Array Matrix

We leverage the IPDA (Intra-day Price Discovery Analysis) data ranges along with the PD Array matrix to gain a deeper understanding of market dynamics and potential trading opportunities.

4. Measure London and New York Session Ranges

Measuring the range of the London session right before the New York open is crucial. Understanding the extreme high and low during this time can help us anticipate retracement moves. For instance, if the market is bearish, the range may aid in finding the next day’s retracement up.

5. Look for Stop Raids

Identifying stop raids is essential in determining potential reversal points. When we see several days of upward movement, it may lead to a bullish scenario. Conversely, a market trading lower into a discount array may indicate a bearish scenario.

6. Determine When to Buy Day Trades

When considering buying day trades, the following criteria can be useful:

  • Preferably during seasonally bullish periods.
  • When the current quarter or new quarter is expected to be bullish.
  • After the Daily chart has reacted positively on a Discount PD Array.
  • When price has a clear unobstructed path to an opposing Premium Array.
  • Favorable days of the week, such as Monday, Tuesday, and Wednesday.
  • Confirming factors like the CBDR (Central Bank Daily Range) and Asian Range.
  • Look for entry opportunities between 2:00 am to 4:00 am NY Time seeking LOD (Low of the Day).
  • Consider the 15 or 5-minute chart timeframe for executing the trade.

7. Take Profits Strategically

Taking profits at the right time is crucial for maximizing gains. Consider the following exit strategies for buy day trades:

  • Aim to take some profits at 20–30 pips.
  • Scale out every 2 STD (Standard Deviations) of the Asian Range or CBDR.
  • Take profits at the Previous Day’s High +5 to +15 pips.
  • Consider taking profits at 50% of the price range you are trading inside the 60-minute timeframe.
  • When trading higher than the Previous Trading Week High or Previous Month High, consider taking profits.
  • Scale out at 5:00 am NY Time, at a short-term high prior to 7:00 am NYO (New York Open), or between 10:00 am to 11:00 am NY time during a rally.
  • Combine any of the above scenarios with a Premium PD Array for better results.

8. When to Look for Short Day Trades

For short day trades, follow a similar process with a bearish bias:

  • Preferably during seasonally bearish periods.
  • When the current quarter or new quarter is expected to be bearish.
  • After the Daily chart has reacted positively on a Premium PD Array.
  • When price has a clear unobstructed path to an opposing Discount Array.
  • Favorable days of the week, such as Monday, Tuesday, and Wednesday.
  • Consider the CBDR and Asian Range for potential entry opportunities between 2:00 am to 4:00 am NY Time seeking HOD (High of the Day).
  • Use the 15 or 5-minute chart timeframe for executing the trade.

9. Placing Stop-Losses for Short Day Trades

Placing stop-losses is vital to manage risk effectively. Follow these guidelines for short day trades:

  • Be patient with moving the initial stop-loss.
  • Consider a stop-loss of 30 pips above the CBDR overlap with PDA.
  • Use a stop-loss of 40 pips above a run above the Asian Range.
  • For Buy Stop Raids, set a stop-loss of 30 pips above the high/entry.
  • In the case of an ISt retracement into -OB, place a stop-loss of 10 pips above HOD.
  • If trading second return for Buy Stops, use a stop-loss of 30 pips above the HOD.
  • For other setups not described above, calculate the stop-loss as 50% of the ADR (Average Daily Range) of the last 5 days added to the Asian Range High.

10. Taking Profits in Short Day Trades

Similar to buy day trades, take profits strategically for short day trades:

  • Aim to take some profits at 20–30 pips.
  • Scale out every 2 STD of the Asian Range or CBDR.
  • Take profits at the Previous Day’s Low -5 to -15 pips.
  • Consider taking profits at 50% of the price range you are trading inside the 60-minute timeframe.
  • When trading lower than the Previous Trading Week Low or Previous Month Low, consider taking profits.
  • Scale out at 5:00 am NY Time, at a short-term low prior to 7:00 am NYO (New York Open), or between 10:00 am to 11:00 am NY time during a decline.
  • Combine any of the above scenarios with a Premium PD Array for better results.

Conclusion

Day trading can be a rewarding endeavor if approached with a well-defined strategy and thorough analysis. By focusing on higher time frames, utilizing IPDA data ranges, and employing stop-loss and profit-taking strategies, traders can significantly increase their chances of executing high probability day trades. Remember to be patient and disciplined, following the checklist of conditions, and making informed decisions based on the market’s behavior. Happy trading!

--

--