Buy When There Are More Buyers

Let’s talk about the one core idea of day trading.

This is so fundamental that a lot of people overlook it. That said, it’s easy to remember because you can summarize it in one sentence.

Make This Trade At 9:30AM On Monday

The Big Picture

It doesn’t matter if you are long-biased or short-biased. The one core idea applies.

And it’s not “Buy low and sell high.”

Even though that’s accurate, it doesn’t tell you what to buy. You could buy low, and the thing never moves, okay? Ten years from now, you could be bagholding a stock that hasn’t done anything.

So, remember this sentence:

Buy when there are more buyers than sellers, and sell when there are more sellers than buyers.

As simple as it sounds, it confuses a lot of people. So, let’s break it down using a technical indicator called the pivot point.

Quick refresher: The pivot point is the average of the high, low, and close from the previous session. The default pivot point is calculated using data from regular trading hours.

The pivot point tells us whether sentiment is bullish or bearish. Now, I’ve simplified this, but only because it’s so fundamental to what we do.

For the sake of this thought experiment, let’s agree that if a stock is above the pivot point, that’s a sign of strength. If it’s below the pivot point, that’s a sign of weakness.

Now, remember that day trading is as much psychology as anything, okay?

So, based on psychology, people are more likely to buy when the stock is above the pivot point.

Now let’s take it a step further. The pivot point is one tool that tells us when there might be more buyers. And what we want to do is…

Join the Buyers and Ride the Wave Up

Smart traders buy when other people are buying. As more traders see the stock moving, more buying volume comes in.

Once it breaks through resistance or to a new high, buyers are in control. There are more buyers than sellers, okay?

At some point, those buyers are going to start selling. And when there are more sellers than buyers, we want to sell.

My Take

The most important lesson to take away from this is that you do not need to time the top or bottom perfectly. Now, I know some people want to notch that perfect trade, where they bought the exact bottom and sold at the top.

Making that your goal never ends well.

Instead, learn to recognize when buyers or sellers are in control and then trade the patterns.

Watchlist

CID HoldCo, Inc. (NASDAQ: DAIC) spiked after-hours on Wednesday (Sept. 16), after announcing it entered into a binding agreement to acquire Envoy Technologies, Inc., and secured $500k working capital.

DAIC ran again in early premarket trading yesterday before consolidating into the open.

At the open, it blew through the Oracle signal before running into resistance around $6.40.

I like the way it held VWAP and didn’t drop below the Oracle level. If it held overnight, watch for continuation. As always, track the setup and trade the pattern.

On My Radar

• The Senate voted to stop the Clarity Act from moving forward (for now)
• The SEC responded by clearing the way for tokenized stock trading
• Register now for the October Millionaire Formula Conference so you can plan accordingly
• The lovely Mrs. Bohen always asks, “What does the card say?” Me: “I know what it says because I wrote it.” It’s a game we play. She knows Higgins did it…