I’m going to go straight to the answer to this question, in my opinion, the best indicator for day trading (or any style of trading for that matter) is volume!
Volume helps me see reversals at both tops and bottoms. The volume indicator helps me see when and where the smart money is stepping into the market.
And of course trading with the smart money, I am likely to see my trades move much faster to the profit target and I tend to earn more money per trade.
The volume indicator, if used correctly can help me see the balance or imbalance of supply and demand and I can make a better-timed trade so that when I get into the trade,
I am usually in profitability throughout most of the trade as I ride the momentum.
One way you could use the volume indicator:
Let’s say you are looking for a bounce off of support in a range of consolidation.
What I would do is look for moves that attempt to break through the lows with a lot of effort, meaning that there is likely more volume when price is being pushed down, but there really isn’t any result for the amount of effort.
This would typically look like a candle or bar that closes just below the support line but with the amount of volume in the move, you would expect to see a sustainable move to the downside and perhaps a new downtrend…
but, when that doesn’t happen and price turns around and begins moving up higher, this can be a trap for the inexperienced traders.
The candles or bars are typically larger than usual range bars with increased volume but there is no follow through.
Then when the reversal takes place on the next candle or bar, I can use that as a possible reversal and a trade entry.
This example appeared twice on my OIL trade as you can see below two attempts made to take out the lows and in both cases the reversal was easy to spot and to trade.
This can also work when price has reached a buying climax and then begins a new markdown phase.
My personal method for trading reversals is to count the waves as price approaches either support or resistance and then watch volume and the size of the bars or candles on the reversals.
This will help to confirm the reversal pattern.
I use this strategy everyday when I day trade or swing trade with my MT4 Trade Copier EA, and
It works on any time frame and it works in any market.