When day trading any market, it is vital to review and prepare for tomorrow’s trade the night before. The work you put in becomes your roadmap for the next trading day. It helps you understand where you are on the trading day and is useful for initiating positions, confirming market direction, and setting trading profit targets.
Select a good day trading market
In day trading, it is best to concentrate on one or two markets. Select a market with good volume and adequate daily movement. The S&P e-minis consistently have the best liquidity and a good daily range. It is one of the best day trading markets. A good day trader can focus only on this market and be successful.
Support and Resistance for Tomorrow’s Trade
Every night after the close, check the charts in the market you trade. Look closely at the higher time frames. The weekly chart provides the general direction of the market. Daily and hourly charts reveal the immediate market trend and key support and resistance levels that often come into play the next trading day. An important question to consider: Do the daily or hourly charts indicate that a move or change in direction is imminent for the next trading day? We can often anticipate how tomorrow will trade from these two higher time frame charts.
Related markets provide information on daily trades
It is also useful to review the charts of the related markets. For example, if you’re trading S&P e-mini futures (symbol = ES), you’ll also want to check Dow mini (YM), Nasdaq 100 mini (NQ), and Russell 2000 mini (TF) futures. . All these markets are related. So, if all four markets are making new highs, we can see that the US stock market overall is strong. We could look the next day to be a buyer on any early weakness. Conversely, if the Dow and S&P markets are making new highs but the Nasdaq and Russell are lagging behind, the next trading day could see a deeper pullback or market turn.
Internal aspects of the market give a daily trading advantage
Review internal market data. Knowing the levels of the Advance-Decline Index, the VIX Index, the NYSE Tick Index, and overall volume can confirm or rule out what you see in price action. If S&P futures rise, but the NYSE Tick and Advance-Decline indices lag behind and fall short of yesterday’s rally levels, then the odds increase that the rally may soon fade and a counter-trend move may take place.
The most important levels for day trading tomorrow
One of the most important things to keep in mind is the high and low of the previous day. The next day’s trade will often revisit yesterday’s high or low before setting the trend for the current day. Trading lower or holding just above yesterday’s low, for example, indicates that the buying seen yesterday continues to be strong today. This testing stock will set the stage for an intraday rally and allow it to enter near the daily low.
Sometimes the market will trade above yesterday’s high, pull back and come back through the high to the downside. The opposite may occur at yesterday’s low. This bullish (or bearish) trap occurs frequently. The move misleads many traders as they buy the breakout to the upside or sell the breakout to the downside. When the market comes back through daily support or resistance, it forces traders on the wrong side of the market to close their trade. This adds jet fuel to push the market in the direction of the reversal. It is one of the best day trading setups.
