The OHLC Indicator is one of the simplest day trading indicators I know of. I don’t know if you’d even call it an indicator. It’s basically just doing something for me that I’m too lazy to do, and I love that because it saves me time and effort. I can use this time to do other tasks in the morning, like scanning for new stocks to add to my watch list. The OHLC indicator stands for Open, High, Low & Close. The indicator simply plots the prior day’s Open, High, Low & Close on your day trading charts.
Why is This Useful?
The OHLC indicator essentially plots 4 built-in points of possible resistance or support. These levels can provide trades on a break, or a bounce and also provide great targets and stops. The high and low are stronger than the open and close but all are valid places to watch for resistance or support.
Day Trading Research in Motion (RIMM) Using This Indicator
Today I took a trade in Research in Motion using the OHLC indictor. It was the perfect storm for this indicator and resulted in a 2 point run, most of which I caught. I won’t get into the specifics of the trade(s) here, because I am merely using this as an example for the OHLC indicator. I did call these trades live on Twitter though.
It Started with the Daily Chart
What made this trade so probable was the fact that the level I saw on the OHLC indicator aligned with a recent level of support on the daily chart as you can see to the right. That general area (give or take a penny or two) provided resistance for 3 days recently.
The Perfect Storm
RIMM then bounced off of this level several times this morning (indicated in the upper chart) as SPY bounced off of its highs for the day. Then, as the SPY trended downward, RIMM held at support which is indicated in the chart at the beginning of this post. The fact that RIMM held strong while the market was falling was a sign of strength and increased the probability for this trade. Then the market bounced near its lows and headed back upwards with authority. This allowed RIMM to finally break its resistance at $77.67 and it began quite a journey upwards to nearly $80. I was adding and taking profits on this one all the way up. Pretty exciting, huh? Now, go ahead and find the Prior Day’s OHLC indicator for your charts and throw it up there. Go on, I’ll wait… Okay, now don’t expect this indicator to lead you to instant success. As you can see in the trade above, there were many factors that went into this trade, as there are with any trade. This is not a system (buy above yesterdays high, sell below yesterdays low) etc. It’s part of an overall day trading strategy. The OHLC indicator is just a tool in the shed. My gift from me to you. Use it wisely. If you have trouble finding the OHLC indicator, I have used many charting programs and can probably help you find it. Just leave a comment asking for help (because others may have the same question) or shoot me an email (Jason@ChartShark.com) and I’ll square you away.