This is a clearly defined trading technique that has proved to be consistently reliable for me over years of trading in all market conditions and is one of 13 I use on a day-to-day basis.

First, you must find stocks that are clearly trending either up or down by using a market scanner (such as those available as an add-on to eSignal).

1. The trend must be clear and unambiguous, with the retracements shallow, certainly with pullbacks not exceeding 50 percent, and preferably much less.
2. Obviously, you are looking for both up and down trends, but they must be clear. If the chart is difficult to read, that means it’s not clear.
3. Look for minimum volume for trades at these levels: After 9:50 a.m., 300,000; after 10:30 a.m., 1,000,000; after 11:30 a.m., 2,000,000. The higher the volume, the better.
4. The stocks you choose can be traded on either the NYSE or NASDAQ.
5. Use a 3-minute candle chart.
6. Have the previous day’s high and low automatically drawn on the chart. These are possible support / resistance areas. This is quite easy to do with eSignal.
7. Include volume bars and a 10-period EMA.
8. Also include a 14-period ATR. This is the default setting. Look at the ATR – obviously, on the 3-minute candle chart – and avoid any stocks with an ATR higher than 18c.
9. Trade only narrow-spread stocks.
   
   Remember that the range of a candle can change suddenly and drastically and without warning. You will find, however, that the range very rarely exceeds three times the ATR. For example, if the ATR is, say, 7c, it is unlikely, but not impossible, that a candle will range more than 21c from high to low.
   
   Think of this as being the maximum loss you are likely to sustain if the price were to move instantly against you. That does not necessarily mean you should have a stop loss 21c away; it means that is the worst case scenario in approximately 95 percent of moves.
   
   Now, position size according to your personal risk profile.
   
   This is what I suggest you experiment with using paper trading (also available in eSignal):
   
   

   ATR Range	Shares
   Up to 8c	400
   9c to 13c	300
   14c to 18c	200

   
   
10. Always be aware of what the market is doing. If futures are clearly rising, do not go short. If futures are clearly falling, do not go long. If futures are going nowhere, the overall market is not going against you. Ideally, you want the futures moving in the same direction as your trade.
11. Entry: You can go long at the break to a new high or short at the break to a new low.
12. Entry: You can enter after a retracement (as described previously) or jump on a strongly trending stock after it has already broken out if you’ve missed the breakout point itself, but be aware that, after a long unbroken move, it becomes more likely that a retracement or reversal will take place.
13. Exit: In an up move, exit on an inverted hammer; in a down move, exit on a hammer.
14. Exit: When you have a candle that has completed on the “wrong” side of the 10-period EMA, exit.
15. Exit: When you have a bearish (in an up move) engulfing candle or a bullish (in a down move) engulfing candle, exit.
16. Exit: When you have a doji followed by a candle going against you, exit.
17. Exit: When the move has petered out, exit.
18. Exit: In a thin choppy market with breakouts / breakdowns failing and not following through, take half off the table at approximately 20c / 25c profit to lock some gains in.
19. Exit: Volume climax followed by no follow-through on the next candle (that is, volume falls off during the formation of that next candle and price does not fall any further in a down move or any higher in an up move) is an indication to exit.
20. Exit: There is another approach that works well with stocks that are trending so well that, in a down trend, the highs of each successive candle are lower than the previous candle and vice versa in an up trend. This approach involves simply exiting when that pattern is broken. In other words, in a down trend, exit when the candle takes out the high of the previous candle; in an up trend, exit when the candle takes out the low of the previous candle.
21. Exit: You can always scale out of a position on any of the exit triggers and leave some if the trend resumes.

On the following charts, the time and point of entry are on the red crosshairs and the images were taken at the time of exit.

The time zone on these charts is London, which is five hours ahead of Eastern Time in the United States, so a time of 2:30 p.m. on the chart is actually 9:30 a.m. Eastern Time.