Knowledge & Discipline is Power
END OF DAY STRATEGY
The End Of Day (EOD) trading strategy is based around a entering swing trades at the end of the day, 5 to 10 minutes before the markets close, when a daily price pattern is most fresh. The goal of the EOD strategy is enter with the short term trend, control risk and capture overnight price action. EOD strategy focuses on highly liquid Blue Chip stocks or EFT's.
The EOD strategy works well with trading accounts under the "pattern day trader" rule, which states that a stock-trader with less then 25K in their account can only make 3 round trip day trades (opening and closing a stock position within the same day) over a five-day period
The EOD/Swing Trading concept is very simple and very boring. No managing of the trade outside of placing the Entry, Exit and Stop. Little need to monitor outside of double checking the proper stop and entry are entered correctly. Following this trade is similar to checking the score of the game on your phone.
Patterns and setups for entering into the EOD strategy can be found on the swing trading tab. For those unable to enter trades before the close of the day, these swing trades can be entered the next trading day if the setup presents itself - never chase price. I use simple price action as my catalyst and no fancy indicator's or magic formulas for nightly trade candidates that favor continuation the next day of the trend through a positive gap and or intra-day trading.
I start my daily EOD scan a half hour before the closing bell for stocks trending on their daily and intra-day charts with a strong intra-day Buy or Sell zone supporting continuation the next trading day. Trades are entered 5 to 10 minutes before the closing bell.
For those purchasing the EOD ideas, an email is sent out 15 minutes before the closing bell. I take any where from 4-10 trades per week choosing quality setups with some days passing if no quality setups are present. Risk management is key, as with over night and swing trades you take much smaller position size trades.
This strategy will catch the over night gaps in your favor more often then the over night gap's that go against you as you are trading with the Daily and Short term trend. Studies have shown that overnight returns can be much more significant then intra-day returns. The momentum of the Daily Trend and short term trend will push the trade to many more positive results then negative results the next trading day.
The number one priority is always to manage risk. Never risk anymore then 1% of your trading account on one trade and never hold an over night position that exceeds the total value of 20% of your account. As always practice on a simulator before going live. This strategy is not a "home run" strategy but a consistent singles strategy.
Click here for Examples of the END OF DAY/Swing Trading Strategy
How to handle and over night trade going against your position or that has benefited you: Unfortunately every once in a while a large gap occurs the next day against your position. Not a great feeling and yes they go the other way more times then not and you benefit. When this type of negative gap exceeds your stop you can exit at the open or wait 5 or 15 minutes and place your stop at the low of the day. Its why you never risk anymore then 20% of your total account value on a single trade and never more then 1% risk per trade.
I suggest any time you wake up in the morning to a nice surprise of a GAIN due to a gap going in your favor, that exceeds your exit goal, that you close the position and take that gain and put it away. Don't spend your excess winnings on celebrating - Save it so when you do have a gap go against you, exceeding your STOP for a larger loss then expected, that you are covered by the insurance you put away from all the times you benefited.