Updated: Jul 28
I want to spend a few moments discussing an important topic for day traders: Identifying bottoms and/or points of relief during a selloff. This topic is especially important given our current high volatility environment where +/- 1%-2% daily swings are common. As a day trader, these volatile periods make for excellent trading and scalping, but it’s incredibly important to be able to recognize when the momentum is likely to change…especially if you’re short. Personally, I love trading on the short side but I’m well aware the bull market we’ve all been trading for years loves to punish shorts. To be a well-rounded day trader, I believe you’ve got to refine your strategies for trading on the long side and short side…and those strategies are not the same. So for this article, I’m going to discuss what I have found to be one of the best clues to identify an intraday bottom where it makes sense to cover your short trade—or go long if you’ve got a few screws loose.