The market gives us trade setups every single morning.
There are always momentum plays on the indexes.
It’s tempting to stare at the S&P all day and guess where it heads next. But that’s a hard way to trade…
I use a simple strategy instead.
Contrary to what some believe, the indexes aren’t one big blob of price action. On any given day, each one tells its own story.
The trick is knowing which one to trade, and where to step in.
Let’s walk through the steps I run before the bell every day.
This could be your strategy. It’s the same process I use every morning to find solid setups from market indexes.
Find the Strong One
I don’t trade all the indexes at once. I trade the one showing me strength.
Three factors tell me where the strength is.
- First, the longer-term trend. Is the index climbing on the daily chart, or chopping sideways? I want the one that’s already pointing upward.
- Second, the open. Did it open above yesterday’s close? That gap tells me buyers showed up in premarket.
- Third, the first few minutes. Is it pressing higher out of the gate, or fading? Early strength tends to carry.
When one index checks all three boxes, that’s my main focus for the day. I don’t need to scan for any other stocks.
One strong chart beats five mediocre ones.
Buy the Pullback, Not the Pop
Remember, we’re managers of risk first and traders second.
Chasing a strong index at the highs feels great for about ten minutes. Then the pullback comes, and you’re underwater on a chart you thought you were right about.
My plan is to wait. I let the strongest index pull back to a level where buyers already proved they’ll step in.
Two spots on the chart earn my attention.
The first is previous support or resistance. A price where the index turned before. Old ceilings flip to floors. Old floors can still hold up.
The second is a demand zone. That’s an area where the index spiked in the past. A demand zone marks the spot where buyers overwhelmed sellers and pushed the price higher. When the index drifts back into that zone, those same buyers tend to defend it again.
The levels that carry the most weight share traits I’ve mentioned before: round numbers ending in 5 or 0, prior highs or lows, and spots the chart has tested more than once.
Buying near those levels keeps my risk tight.
From that level, the setup either holds and runs, or it breaks, and I’m out fast.
Pick a Short-Dated Strike
Day trading the indexes calls for short-dated contracts.
I always look at the nearest expiration, usually today or tomorrow. Those contracts move fast and cost less, which keeps my risk small.
Then I pick the strike closest to my entry zone. If I’m buying an index as it pulls into support, I want a call with a strike sitting right around that level.
Close-to-the-money, near-dated, and small. That combination helps my trade work quickly when the bounce comes without tying up too much capital.
Pay Yourself, Then Protect Yourself
A winning trade still loses money if you never take the gains.
As the index spikes, scale out in pieces to ensure you maximize your gains.
- I take a chunk off at the first resistance overhead.
- I take another chunk off at the next resistance level from prior days.
- Then I let a small position ride toward key psychological numbers, or until a moving average breaks down.
Pay yourself on the way up. The market gives, but it takes from anyone who waits too long.
Small losses keep us in the game. Big losses send you back to the lobby. Take your gains and avoid big losses at all costs.
This entire process repeats every day when the market opens.
Find the strong index. Wait for the pullback into a level buyers can defend. Buy a near-dated strike close to that level. Scale out as it runs. Cut it fast if the level breaks.
I’m not predicting where the indexes will go. That’s not my job.
My job is to read the strength, mark key levels, and let the trade come to me.
Patient people take money from impatient people. Use this strategy, wait for your spot, and trade the index that’s already doing the work.
Be good (and be good to others),
Ben Sturgill
*Past performance does not indicate future results. Not typical.
