Many day traders use technical analysis by analysing price charts, such as candlestick charts, and would recommend a 'clean' approach to their trading strategy. These traders prefer not to load their charts with lots of different indicators in order to try and second-guess direction. Rather, they will focus solely on price; this is often referred to as 'price action trading'. When trading in this way, you still have some key reference points based on what has happened previously, to help you plan future trades.
For some day traders, the previous day’s high and low are important levels to watch when it comes to planning a strategy for that day. This is actually quite logical: yesterday's high marked the point where sentiment changed and the sellers came back into the market, pushing the price lower. The market consensus, therefore, was that the price was too high. And of course, the previous day's low shows where the buyers regained confidence as they felt the market was undervalued – they voted with their wallets and bought. These levels could be important if they come into play again, and can provide the cornerstone of a day trading strategy.