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Day Trading Strategies By Markus Heitkoetter

Rockwell Trading

Markus Heitkoetter invented many profitable day trading strategies. He is the author of the global bestseller The Complete Guide to Day Trading: A Practical Manual From a Professional Day Trading Coach. For more information about his trading style and strategies, we recommend reading his book.

In this article, you will learn how to have confidence in your trading decisions by using simple day trading strategies that only relies on two indicators.

What Are The Best Markets For These Day Trading Strategies?

This strategy is a simple trend-following strategy that should work in any market, but as a day trader, Markus prefers to trade the futures market. We at StockManiacs.net tested the strategy successfully in our Nifty Index and recommend these to all traders.

How To Set Up Your Day Trading Software?

When selecting a timeframe, Markus preferred tick charts for this strategy. If you’re not familiar with tick charts, a tick bar completes after a specific number of trades, instead of a time frame like a 5 or 15-minute bar. As an example, Markus used a 4,500 tick chart for the E-mini S&P. This means that a bar or a candle is plotted every 4,500 trades. A bar can take 2 to 5 minutes to complete, but the actual time it takes to complete really doesn’t matter. All that counts is the number of trades that have been executed in the market. You can successfully set a 4500 tick bar in Amibroker software from Tools –> Preferences –> Intraday.

Some More Insight on Tick Charts

The advantage of using tick charts is that the number of bars will increase and decrease depending on volatility. When the markets are moving fast and there are more trades, you will have more bars. If the markets are quiet you will have fewer bars.

As an example, a setting of 4,500 trades for the E-mini S&P will typically produce between 7 and 10 bars during the 17-hour overnight session (16:30 pm EST and 9:30 am EST). This is because the E-mini S&P is not actively traded during this time. However, in the first two hours of active trading (between 9:30 am and 11:30 am EST), you can expect between 16 and 24 bars, depending on the trading activity of the day.

Tick charts remove the time factor from charts and add volume and volatility to your bars. Give it a try and you’ll probably find that tick charts are an easier way to see intraday movements in the markets you trade.

Note: We should update tick settings for the markets we follow 2-3 times per year since volatility in the markets can change.

Best Indicators for Day Trading Strategies

The next step is to add the popular MACD Indicator to the chart. Just use the standard settings:

  • 26 for the slow moving average
  • 12 for the fast moving average and
  • 9 for the moving average of the MACD – the “signal line”

We use the MACD to identify the direction of the market, but Markus used it with a little twist. The market is in an uptrend if the MACD is above its signal line and above the zero line. The market is in a downtrend if the MACD is below its signal line and below the zero line.

Amibroker software allows us to color the bars based on certain criteria. Therefore I am coloring the bars in an uptrend (according to the definition above) green and the bars in a downtrend red.

Rockwell Day Trading Strategies

To avoid whipsaws in a sideways market and to only catch strong trends, Markus added a second indicator: Bollinger Bands. He used the following settings:

  • 12 for the moving average
  • 2 for the standard deviation

Entry Signals of Markus Heitkoetter

Markus used the Bollinger Bands to determine our entry signal. Enter LONG with a stop order at the value of the Upper Bollinger Band if the market is in an uptrend (see image above). If you are not filled, adjust your stop order to reflect the Upper Bollinger Band value as long as we remain in an uptrend.

Enter SHORT with a stop order at the value of the Lower Bollinger Band if the market is in a downtrend (see image above). If you are not filled, adjust your stop order to reflect the Lower Bollinger Band as long as we remain in a downtrend.

By using stop orders we will only be triggered if price pushes through the Bollinger Band, which can signal a continuation of the trend. You will see that these simple rules allow you to catch a strong trend. Also, the use of the Bollinger Bands will help you avoid many “false signals”.

Exit Signals of Markus Heitkoetter

Markus used this Average Daily Range (ADR) to calculate our stop loss and profit target:

  • Stop Loss = ADR * 0.10
  • Profit Target = ADR * 0.15

As you can see, Markus used 10% of the Average Daily Range as a stop loss and 15% of the ADR as a profit target. He highly recommended using a profit target to take profits. He also recommended to get out of a trade before it turns against you.

In addition, to profiting target and stop-loss, Markus closed a trade if a bar completes and he saw a MACD crossover. If long and MACD crosses back below the signal line, or short and MACD crosses back above the signal line, he wanted to close the trade to get out of a position in case the trend reverses.

Why This is One of the Best Day Trading Strategies?

This strategy is one of the best day trading strategies that’s easy to understand and execute. Test it out and you will be surprised at how robust it is. Once you are familiar with the basic rules, consider incorporating your personal trading preferences. Try scaling in and out of a position, using trailing stops or any additional filters that you are comfortable with.

Rockwell Trading AmiBroker AFL

We in StockManiacs.net have also developed a simple Amibroker AFL formula for this Rockwell bar Colour day trading strategies. You can freely download and use the Rockwell bar Colour AFL by clicking this button below.

You can immediately see the Rockwell colored bars on your Amibroker charting software. You may distribute this AmiBroker formula to your friends, but do not forget them to refer to our site.

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