Master Day Trading in Just 30 Days: Lesson #5
In this 5th installment of our day trading training series, we are going to continue to focus on order entry drills. You will be entering orders into your trading platform, while keeping an eye on the charts. We have to warn you that this particular drill will require even more focus than the last one.
If you’re here, then we will assume that you already have your trading environment set up, so we’ll just jump straight into a description of the drill. If not, then please review the last few lessons before continuing on.
Drill #2: Entering Market Orders AND Limit Orders
For this drill you are going to enter market orders to initiate long trades but LIMIT orders to exit those trades. The limit exit orders will move as the price moves, so maintaining your focus for longer periods of time will be necessary in order to get through this exercise. We probably shouldn’t have to tell you this, but just in case, please complete this drill on your simulator!
To Enter A New (Long) Trade:
This is the same as the last lesson — you will enter a market order to purchase 1 contract of the e-mini S&P contract (usually symbol ESH16 or similar) when the following condition(s) are met:
- Price pushes below the lower Keltner band and then —
- The bar closes, i.e.: the bar that has pushed below the lower Keltner band has completed and a new bar is starting to form.
To Exit Your Trade:
You will exit the trade when price touches the middle band. In order to do this, you will enter a limit order to sell at the price level of the middle band as soon your entry order is filled. Now, here is the tricky part — as price moves up, the price level of the middle band could move up. If this happens, do not move your limit order up. But, if the middle band price level moves down, move your limit order to sell DOWN. This will have the effect of reducing your profit target. For this exercise, you can never move your limit order up, you can only move it down.
If price touches your limit price but you are not filled, then, when the bar closes and a new one starts to form, you should exit the trade using a market order. Don’t forget to cancel your existing limit order once you are out of the trade.
You should try to enter and exit at least 15 of these buy and sell order sets over the next few days.
Bonus: You can give yourself bonus points if you keep a spreadsheet of all the trades you make. If you need a sample spreadsheet you can get it here.
Bonus #2: Give yourself a second set of bonus points if you try limit orders on both entry and exit. You would place your entry limit to buy at the price level of the lower band, and adjust it as the band moves up or down. If price hits your level but your order does not get filled by the time the bar closes, then convert the order to a market order.
In the chart below, the blue box indicates where you would be entering your market order to initiate a long trade. The red arrows indicate that you will be adjusting your sell limit price down, as the middle band moves down. Generally, you will be adjusting your sell limit price on every new bar that is formed.
“You should try to enter and exit at least 15 of these buy and sell order sets over the next few days!”
In this second chart example above, the blue box indicates where you would be entering your market order to initiate a long trade. The red arrows indicate that you will be pulling your sell limit price down, as the middle band moves down. This example shows a losing trade.
Need Help Setting Up Your Charts Or Workspace On Tradestation?
Sometimes its just easier to get someone else to set up your charts for you or maybe you just need clarification on the process or exercise. See how much you can get accomplished in one hour with a 60 min 1-on-1 coaching session!
In fast markets, the bars can sometimes form faster than you can adjust price using your mouse. To compensate, many trading platforms allow you program “macro” keys to quickly perform certain actions, including adjusting price. In fast markets, you would want to be using your keyboard instead of the mouse for price adjustments. So, if you have the time, make it a point to learn how to use your keyboard to enter orders or adjust prices for orders once they are entered.
Some platforms also allow you to trade directly on your chart. You can point and click at a price level and use your mouse to move order lines to adjust your price levels. If your platform offers this feature, you should try it out in these exercises to see if you prefer working directly on the chart.
Photograph provided by shutterstock.om
Photograph provided by canstockphoto.com
As with the prior lesson, you have a lot of things to do, so there will be no new terms for this lesson.
You will have to invest more time to complete these practice trades, especially if you are holding down a day job. So, once again, we have set the time delay on the next lesson to 3 days instead of 1 or 2 days. This should give you plenty of time to complete this practical. The next lesson is another practical similar to this, so be prepared!
P.S.: Do you feel yourself getting into the rhythm of the price movements as you go through this exercise? Almost as if you can feel the prices move in your bones? Put on enough trades, and you will start to develop that “gut” feeling for price movement. We would be very curious how you feel after you complete this exercise. So drop us a note using the feedback button below!
Coming Up Next
- Increase your comfort level with your trading platform
- Practical: Entering Market Orders, Limit Orders AND Stop-Market Orders
- Market structure as shown on charts and how that helps your profitability
- Defining legs and swings on the charts, which will help the precision timing of your trade entries and exits
- All about trend reversals, so you can enter new trends early
- Exercises to practice scalping and intraday trades, which will contribute to your cash flow and smooth out your equity curve