Previous Day High/Low

Most charting platforms automatically show previous day levels. In TradingView, use 'Previous Day High/Low' indicator. In IG or CMC, look at the daily chart for yesterday's candle - high is the top wick, low is the bottom wick. Note these levels before the market opens.

It depends on market context. In trending markets, breakouts work better. In ranging markets, reversals work better. Start with one approach, master it, then add the other. Many traders prefer reversals because of better risk:reward (tighter stops).

A typical buffer is 5-15 points on FTSE or 0.1-0.2% on stocks. This prevents getting triggered by exact level touches that reverse. For breakouts, entry trigger = PDH + buffer. For reversals, you want price to reach the level then confirm.

You can, but then you're using yesterday's levels for a swing trade, not intraday. The levels become less relevant as more days pass. For swing trading, consider using weekly high/low instead. For intraday, close before session end.

This indicates a ranging day with wide swings. You could trade reversals at both levels, but be cautious - multiple level tests suggest volatility. If you get stopped on one side, be careful about immediately trading the other.

Compare PDH/PDL to the last 3-5 days. If several days have similar highs or lows (within 0.2-0.3%), that's confluence. Example: If PDL today is 7520 and three days ago the low was 7518, that zone is significant. Score higher confluence levels for trading priority.

Mid-morning (9:30-11:00 AM) is often good for initial tests. Afternoon (2:00-4:00 PM) is good for confirmed breakouts as US overlap adds volume. Avoid the first 15-30 minutes (opening volatility) and last 15 minutes (closing noise).

If price gaps through the level, the level undergoes role reversal. Gap above PDH = PDH becomes support. Wait for a pullback to test the level. If it bounces, that confirms the gap. Don't blindly fade gaps - they often continue.

Counter-trend trades have lower probability. In an uptrend, shorting PDH rejections often fails. If you do trade counter-trend, use smaller size, tighter stops, and require strong confirmation. Better to align with the trend.

There's no fixed number, but typically: first test often holds (fakeout), second test is meaningful, third test often breaks through. The more a level is tested, the weaker it becomes as orders are absorbed. Trade early tests for reversals.

Create criteria: +2 for multi-day confluence (3+ days), +2 for round number, +1 for volume history at level, +2 for trend alignment, +1 for indicator confluence. Total 0-8+. Trade scores 6+ with full size, 4-5 reduced, below 4 skip.

For reversals expecting level to hold: credit spreads (bull put at PDL, bear call at PDH). For breakouts: long calls above PDH or long puts below PDL. For range-bound: iron condors with wings at PDH/PDL. Match expiry to expected holding time.

Use daily OHLC for level calculation, intraday for entries. Calculate PDH/PDL only from prior day (no lookahead). Test breakout and reversal separately. Segment by regime (trending/ranging). Include realistic slippage at levels. Walk-forward validate.

High volatility: wider buffers (10-20pts vs 5-10pts), wider stops, larger targets. Low volatility: tighter buffers, tighter stops, smaller targets. Scale parameters by current_vol/average_vol ratio. Consider ATR-based rather than fixed parameters.

Skip when: major news scheduled during session (levels may be overridden), very low volatility (minimal movement from levels), price already gapped well beyond levels (old levels less relevant), third+ test of level same day (level likely exhausted).