Day Trading Strategy
Many new day traders jump into the market without a
strategy and are lucky to last a few weeks or months before they lose their
trading capital. This in itself is a foolish move to make and these traders
would be better off to simply donate the trading capital they intended on using
to day trade, to their favorite charity.
Day trading ‘is not’ a get rich quick scheme so if you think it is, forget it
right now and move on. It takes a great deal of discipline and skill – luck on
not part of the equation so, if you don’t intend to utilize discipline to enter,
exit or take profits or losses on a trade, find something else to waste your
Creating a successful day trading strategy will involve you ‘learning’ to day
trade first. To learn to day trade, you first need a broker account so that you
can ‘demo trade’ – trading without risking any capital.
Since you are not risking any real capital, first take a few weeks to play with
your trading platform to see what works best for you as far as charts, level II
for stocks trading and order systems. Although demo trading will not allow you
to see actual profits and losses, the purpose is to allow you to create ‘act and
react’ strategies, based on your own criteria.
The key to successful demo trading of course means, only demo with the amount of
trading capital that you will be using, when you finally develop your own day
trading strategy. If you plan to use $25,000 or $100,000 or more in trading
capital, for example, that is what you should base your demo trades on. It would
be meaningless to demo with more/less trading capital then you intend on using
since you won't be able to place trades of appropriate size.
Monitor the markets during the live market sessions and be sure to be all cash,
before you log out of your demo account, at the end of the day.
Start by making demo trades based on chart activity for the symbol you are
watching, as well as overall market activity. Prior to entering a demo trade you
should first know how much you are willing to lose. Knowing ahead of time how
much you intend to lose, is the key for you to control your stop loss.
Next you should determine how you will know when to exit a trade. Any day trader
will tell you, when they are in a winning position, where they are seeing gains
increase, it can create butterflies in their stomach – increase the risk of a
failure of their trading strategy. Controlling emotions is part of discipline.
Work your demo trading by working your way to increased profits by holding onto
winning positions longer or, taking profits on parts of your position instead of
all at once. Set a daily goal at profits and once you hit it, you would then
stop trading for that day to avoid the risk of trading away your profits.
allows you to become accustomed to overall trading activity such as placing
trades for long positions and short positions as well as exiting positions. In
layman terms, demo trading will enable you the opportunity to learn how to trade
using the trading platform of your choice.
Do not jump into switching to live trading, with live capital until you master
the art of discipline. Discipline is needed to control your trades by entries,
exits, profits and or losses. Chasing a position means, you are not utilizing
discipline and will result in loss of some, most or all of your trading capital.
Remember, stocks, futures and forex move on their own free will and when you are
in a position – never ever ever ‘think’ it will go one way or the other - 'act
and react' to what you see, not what you think. Trading is merely acting and
reacting to what you see in charts which can change at any given moment by
outside influence from the market or global geopolitical events that no one sees