Why Trading ‘End-of-Day’ Strategies Will Improve Your Results.
When I talk about ‘End-of-Day’ trading strategies, what I am basically talking about is trading based on the daily chart time frame. We are focusing on daily chart candles that are closed out, not candles that are still open. The actual daily close of the Forex market occurs at 5pm New York time, however, not all brokers provide charts that show the 5pm New York close. To make sure you are seeing the true daily close of the market, you need a broker that offers 5 daily bars per week that close at 5pm New York time. Here’s a link to get the right charting platform – New York close charts.
What will trading end-of-day do for you? Well, if you actually do it, it will improve your trading results and greatly simplify the entire trading process. It does this through several channels; it reduces the amount of time and number of variables needed for trading which helps to naturally form the correct trading mindset because you aren’t watching charts all day (most traders’ downfall). Watching charts too long is what causes you to over-think and over-analyze and ultimately over-trade (and lose money). End-of-day trading also naturally helps you with money management and trade management through the set and forget trading approach that goes along with it. It helps to eliminate much of the second-guessing, confusion and emotion that plague most traders.
Essentially, end-of-day trading gives traders a framework, that if properly utilized, allows them to avoid most of the trading mistakes that people make simply due to how we are wired. We are pre-wired, if you will, to seek pleasure and avoid pain, it’s in our DNA. This has served humans well for many, many centuries. However, in the modern world this type of wiring can cause many problems, especially with trading. For example: we naturally want to trade often because it makes us FEEL safe and ‘in control’ and it gives us an injection of endorphins when we hit the buy or sell button because we are full of the hope that we will hit a winner. Then, when that trade turns against us as it sometimes does, what do we naturally want to do? Avoid pain. So, we close the trade out for a small loss, only to then see it move back in our favor and go on to be a would-have-been winner, how frustrating! This is just one example of how we are wired to self-destruct in the market, there are many more.
So, what does end-of-day trading do for you? Multiple things, but perhaps the most beneficial is that it gives you a framework to help you circumnavigate your own tendencies and ‘faulty’ trading wiring. Read on to learn more…
Who’s really in control? (you or the market)
The only thing you can control in trading is yourself. If you over-trade and trade like a machine-gunner rather than trade like a sniper, you are not controlling yourself and you will end up being controlled by the market. The market can affect your emotions in very negative ways that cause you to give your money to it very quickly. The only way to counteract this is by controlling yourself.
The reason many people are attracted to day trading is because they feel more in control of the market by looking at smaller time frames and jumping in and out of positions frequently. Unfortunately for them, they have not figured out that they have the same amount of control as the swing trader who may hold positions for a week or more and only looks at the market for twenty minutes a day or even less. Neither trader has any control over the market, but day-trading and scalping gives traders the illusion of more control. The only thing we really have control over in trading, is ourselves.
What is a good approach to make sure you are controlling yourself and not being controlled by the market? End-of-Day trading!
Here’s how it’s done…
How to trade End-of-Day…
The best way for me to ‘explain’ how to trade end-of-day strategies is to simply show you. The proof is in the pudding, so to speak, so let’s take a look at some of my favorite price action signals and how you can trade them in an end-of-day manner.
OK, first off, we are going to check out how you can trade end-of-day with my inside bar price action pattern. In the chart image below, notice we had an existing up trend before the inside bar(s) pattern formed, and we typically like to trade inside bars with the daily chart trend, so we were looking good. Also, of course, notice we are on the DAILY CHART time frame and the inside bar pattern was closed out before our entry, so we were trading end of day.
Now, here is where the REAL POWER OF END-OF-DAY TRADING comes in…
In the above inside bar example, you will notice that the trade worked out nicely. This doesn’t always happen of course, because winners and losers are randomly distributed for any trading strategy, but in this case, it was a winner. The most important thing to notice is that you literally had to do nothing but place your entry order, stop loss and profit target and the market took care of the rest. You could have literally gone on a 7-day, 6-night Caribbean cruise, not looked at your trade and come back to a 5R winner by employing set and forget and trading this chart end-of-day.
You have eliminated the most difficult element of trading; trade management. You’ve taken your human emotion out of the equation by trading end-of-day and setting everything up in advance and just letting the trade run. The results speak for themselves!
Let’s look at another example…
Now we are going to check out an example of trading the pin bar trading strategy in an end-of-day manner…
In the chart example below, we had a solid and defined trading range in the Gold market when we got a daily chart pin bar buy signal at the bottom of the range (key support level). Actually, we got back-to-back pin bar buy signals at this key support level, so we had plenty of confirmation and confluence for a nice end-of-day trade entry. Coincidentally, we did discuss this exact pin bar setup in our daily members market commentary the day it formed as a potential buying opportunity.
As of this writing, a solid 3R profit was possible from this trade setup, without any involvement needed on your part. You could have entered this trade and let it sit, come back 11 days later and you had a 3R profit in the bank. Now, how easy is it to ignore the market for a week or two while your trades play out? Perhaps not as easy it sounds, but if you want to trade end-of-day, you must believe in the power of patience, in other words, you have to fight your own desire to over-analyze, over-think and over-trade, and you will come out WELL ahead of 90% of most traders.
Before we move on to our next example, here is a little-added benefit of daily chart or end-of-day trading that whilst obvious, needs pointing out…
Many traders prefer to trade off these daily chart signals because it is a less stressful way to trade since you don’t have to ‘wade through’ hours of less-significant price action. Think about it, would you rather sit at your charts trying to find a ‘needle in a haystack’ on the 5-minute charts or sit back and analyze the daily chart time frame and only focus on obvious end-of-day setups?
Don’t be fooled into thinking there are more ‘opportunities’ by looking at the short time frames, it’s just not true. There ARE more price bars, sure, but are they really opportunities? Or are they just noise? Remember, the higher in time frame you go the more significant each bar or candlestick becomes, and the daily chart time frame is truly the sweet-spot for a trader.
Let’s look at an example of trading end-of-day with the fakey pattern…
In the chart image below, we see a fine example of a fakey pin bar combo pattern which formed in-line with the underlying daily chart uptrend in the Dow Jones Index.
Had you entered this fakey near the breakout of the inside bar or pin bar high and stop loss below the mother bar low, you would currently be up a nice 2R reward. The ‘catch’, if you want to call it that, is that you had to sit on your hands for about 10 trading days before you realized that reward.
Most traders were over-trading and blowing out their accounts during those 10 days. Do you want to be the trader who is patiently waiting for high-probability trades to play out, like the ones above, or do you want to be the trader who is trading intra-day during those 10 days? I can guarantee you the trader who entered one trade and waited patiently for it to play out was FAR better off than the guy who day-traded that whole time.
Conclusion.
You now understand why end-of-day trading strategies can significantly improve your results in the market, and you also have a basic understanding of how to trade end-of-day. I don’t want to sound like this is easy, but it is far easier to trade end-of-day than the way most traders trade. Most traders trade way too much, they meddle too much with their trades and they expend too much mental energy on their trading. This leads to losses, losses and more losses.
The difficult part of trading lies in conquering your inner demons, not in finding entries or in comprehending how to read a price chart. What I have laid out for you in today’s lesson and what I explain in much greater detail in my trading course, is exactly how I use end-of-day trading strategies to circumnavigate my own faulty human wiring (we all have it) as it applies to trading. By controlling myself and only focusing on that, I can truly take advantage of the incredible opportunities the market offers me, however frequently or infrequently that may be.
I WOULD LOVE TO HEAR YOUR COMMENTS & STORIES BELOW 🙂