Here on The Slope, we are constantly railing about the phenomena known as the "the end of day (EOD) ramp." Yes, it seems to be manipulative. Yes, it appears to be contrived and yes, it is even deplorable. In price action, this is the proclivity of the stock market to go up (often large) starting at around 3:30 pm EST. Instead of complaining about it, make some money off it! THAT is our JOB as traders, after all.
Trading edges are found when patterns repeat. Since TARP, this has been almost a constant pattern. It was a minor pattern before TARP but it has become much more pronounced since TARP. Here is how I identify the trade, how I enter the trade and how I manage the trade. Since I am predominately an ES (emini S&P futures) day trader, I will use the ES here. You can possibly trade it with other instruments but back test this with your instrument of choice. This trade is to be done with a minimum of two contracts. If you are a one lot trader, do not trade this setup.
Identifying The Trade: Your window of opportunity is between 3:30 and 3:40 pm (EST). Price at entry must be at least 3 points (12 ticks) below the session high. By session high I mean the open out cry (pit session) high which starts at 9:30 am (EST) NOT the GLOBEX high (GLOBEX trading session starts the previous day at 4:30 pm (EST).
Trade Entry: Do not enter this trade prior to 3:30 pm or after 3:39 pm. You will attempt to identify the lowest price action within this time frame. I have notice over the past three months or so that the low is coming a bit later. Around 3:35 pm. Use whatever methodology your currently using to identify breakout price and break down price action, bottoming formations on your one minute chart, etc. to identify the low during this time window. You can scale into the position IF that is allowed by your trading plan and your trading with size (more than 2 contracts) if price moves against your entry. I would not suggest this. I do not do it but it is a viable entry plan.
Managing the Trade: Upon entry, place your stop loss at two full points (8 ticks=$100 per contract) beneath your entry price. Place a 1.25 point (5 ticks=$62.50 per contract) price target above entry for one half your position size. Then, kick back and relax. IF your 1.25 target is hit, immediately move your stop up to your entry price. Do NOT forget that you have reduced your trade size by half. Reduce your contract size on the stop accordingly. Example: your trading 4 contracts. Your stop loss is for four contracts. If you have scaled out half (2 contracts). Your stop should now be only for two contracts. Now, as price moves in favor of the trade, do NOT start trailing a stop! You want to be in this trade through cash close which is at 4:00 pm! Still in the trade? Now the real fun begins. After cash close, you have two kinds of stops. A trailing stop and a mental time stop. At 4:05 pm, move your stop up to 1.25 points below price and trail it. Still in the trade at 4:13 pm? Exit the trade at the market. Do NOT stay in the trade during the last two minutes of the pit session which closes at 4:15 pm.
And there you have it. A complete setup and trading plan for the EOD ramp. You may find that this setup will often make your trading day. Last week, it was worth over 10 points ($500 per contract) to me. Even on Friday, when the ramp did not develop, I made money with it. Target price hit for 1.25 points on half, stopped out at entry on the other half of the position. Hope this helps.
Yours in the eternal quest of The Trading Edge-Market Sniper