Notes on Daily Bias Trading

Introduction

• Focus on essentials for trading daily bias.
• Analysis based on the dollar index (daily chart).
• Aim to find bias across all pairs, not to predict daily movements.

Key Concepts

• Daily Bias: Understanding whether the day is likely to close up or down.
• Human Error: Acknowledge that predictions are not guaranteed; mistakes can happen.
• Practice in Demo Accounts: Essential for building understanding without real risk.

Analyzing Daily Charts

• Look for short-term highs and lows.
• Identify key turning points using traditional support and resistance theory.
  • Support: Areas where price tends to bounce up.
  • Resistance: Areas where price tends to bounce down.
• Focus on intermediate-term price points and swing highs/lows.
• Understand market behavior:
  • Overbought to oversold states and consolidation zones.

Market Dynamics

• When the market isn't trending:
  • Trade within established support and resistance levels.
  • Identify potential reversal points at swing highs and lows.
• False Breakouts: Be cautious of movements above old highs or below old lows, as they may not hold.

Daily Trading Strategies

• Momentum Trading: Look for price movement above old highs or below old lows to determine bias.
  • If prices run above an old high, expect continued bullishness but be wary of reversal.
  • If below an old low, anticipate potential bullish reversal after consolidation.
• Weekly Analysis: Use previous day’s highs/lows to inform trades for following days.
  • Bullish markets should focus on reaching previous day's highs; bearish markets on previous day's lows.

Outside Days and Reversal Signals

• Outside Day: A day where the price range exceeds the previous day’s range, often indicating potential reversals.
• If a bullish market has an outside day closing on low, this can signal a buying opportunity.
• Reversal Signs: Monitor when both the previous day’s high and low are breached; indicates indecisiveness or potential reversal.

Application to Market Pairs

• Analysis of the dollar index informs views on related currency pairs (e.g., Euro Dollar).
• If dollar is bullish, expect Euro Dollar to show bearish characteristics:
  • Daily highs in Euro Dollar do not hold; focus on previous day’s lows.

Conclusion

• Utilize a framework for determining daily bias and potential market movements.
• Continue learning and applying these concepts in trading practice.
• For more information, visit innercircletrader.com.