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Trading Style: Pit Style Trading



Pit style trading is designed around a method of floor trading that the market markers have used for decades. If you think about who consistently makes money day after day, it's the market movers. It's their job to trade against the public (speculators) to move the markets. We base this style on pit trading and blend it with other day trading techniques to create Pit style trading.

If the market opens with positive news and the public is jumping in getting long the question you need to ask is who is selling? Its the job of the market makers to create liquidity in the markets in order to allow orders to be filled and to make money for themselves. In pit style trading we look to trade only when liquidity is high and are always looking to trade on the edge of the market and at high probability price action areas.

What to expect Pit style trading is a similar to day trading in that we never hold a position overnight and in most cases we usually want to be in and out of the market as fast as possible. Unlike most day trading strategies a pit style trader looks to trade off of one price action level to the next and only if the setup meets strict rules. When trading this style you'll take less trades than you would with other day trading styles however the trades will be higher probability. You will almost always have a clear set of rules telling you when to enter and exit and you'll usually be making 1-3 high profit trades a day.

Market Conditions

A pit style trader is looking for similar market conditions to day traders but with a few added factors. We are also looking at time and always keep track of the intraday day bias. Many of our pit style trading rules revolve around the time of day as volume and markets conditions shift.

Strategies

Pit style traders use several different trade setups that change as the trading session goes on. We use the opening range breakout strategy to take advantage of high volume and market movement that comes with the first hour or so of trading. Once lunch hits we can look to trade reversals using our bias 180 and ricochet trades. Finally we can use our Pro EOD strategy to fill in the gaps and take high probability trades any time during the trading session.

Conclusion

Pit style trading, if done correctly, is a low risk/high reward style of trading due to the low number of trades and strict money management rules. Just like in day trading you will need a strong, well-practiced trading plan and control over your emotions. In order to be successful, you must have a thorough understanding of the markets you will be trading; this includes knowing the best times for volume as well as what economic events will impact the market. You’ll also need to practice with a Sims account or in a Market replay feed to get used to making quick, tough decisions on when and where to enter the market.

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