Day Trading Tactics

[Pound foolish]

This will probably sound a stupid question to those who are experienced in Day Trading.

I am considering (I have for some time) doing day trading on my own account as a living.

I work as a Construction Manager (30 years) and I have had enough of it.

I am intelligent and can rationalise. I watch BBC World Business Report at 5.30am each moring, and have an idea which way the news items will affect certain company's shares. Then I note that instaed of them going down (on bad news) or up (or good results) they go up on bad news (because it was not AS BAD as expeected) and down on good news because people had thought it would have been better.

If metals prices for example go up, mining stocks have been known to go down on future "fears".

It does seem that there is a heard mentality in this and that day trading owes more to the day trend irrespective of any real fact, than it does to informed decision making.

I am now in the blue for the first time since I stared buying last November even after losses from buying Woolworth (based on Alan Sugar buying them!) and a duff mining stock Daily Mail Midas recommended!

I have had a good week with AVIVA, L&G and Xstrata even though the FTSE has only risen a few points each day, these shares have gone up double fugures.

I am now looking at what Stop Loss I shoudl set for the first time.

 

[Bakez]

This is exactly how I turned 100k into 500k on a demo account.

I have never used fancy graphs, indicators, trend lines, support levels etc. Its always about hype around different companies.

I have only ever placed one real trade but I had such low capital that after fees and tax I only made a few ££ and it just wasnt worth it so I'm looking at trying spread betting using professional poker player style money management until I think proper trading will be worth the risk.

 

[Bakez]

The key now for me is somewhere to get prices and company information/news/statements live rather than on a 15min delay

 

[Pound foolish]

The key now for me is somewhere to get prices and company information/news/statements live rather than on a 15min delay

ADVFN does this for around £10 a month. The 15 minute delay is a bummer and when trying to day trade almost impossible.

 

[foredog]

If you have an Ig accoun then they'll have live proces for the bigger stocks and i think you get reuters news feed, may be worth opening an account and putting a few quid in to get that?

 

[Bakez]

I suppose the disadvantage of picking trades our way is that you actually have to be 'in' the market all the time.. If you went on a 2 week holidays somewhere you couldn't just completely switch off as when you get back things will be completely different. Whereas from what I've seen from posters who trade using graphs and systems on FX like 3 ducks it appears as though you could effectively let a computer do it all for you once you have faith in your system and not even bother with economic news.

 

[Bakez]

If you have an Ig accoun then they'll have live proces for the bigger stocks and i think you get reuters news feed, may be worth opening an account and putting a few quid in to get that?

I'm having a look at IG for spread betting. The one trade I did for real was with Barclays and although the fees and taxes made my trade pointless (although when I sold I had a 17% increase on the price I bought at) I was impressed with the live stream of trading statements, reports and news - especially early in the morning when you need as much time as possible to read everything and decide what you are going to do ready for 8.00am and get in there straight away. I suppose all companies will have this but with short term trading the earlier you get the information the better, every second literally counts in some cases.

Right now I'm on a 15min delay but that's alright on a demo account as the prices are also delayed by 15mins.

 

[tomorton]

Trading by trying to anticipate the direction the market will take on news is like motor racing in fog. You can see someone coming up fast behind and are tempted to speed up to keep a lead on them: but you can't see which way the next corner leads and eventually - bam!

Its more rational to let the market lead the way and get on the trend as they go past. You will be able to see clearly if its time to go long or short to enter, and you should see some warning notice if the trend starts to weaken so you have time to get out.

Another way to approach this is to set a buy order and a sell order outside the recent range of a price when some key news is expected. The market moves the price towards one of your orders and as soon as its triggered you are automatically in the right trend and the other is cancelled, or you could use it as a stop.

Daytrading on news puts you head to head against several thousand full time experienced professionals. Its just as rational and a lot easier just to trade on the intraday chart signals. There is no point trying to analyse at 5:30 what the market will do today if your first entry will be after the establishment of a trend and will only last 20 minutes anyway.

In short-term trading, too much emphasis is given to the type of entry signal. On short timescales, the exit is paramount, not the type of entry signal, plus the movement you hope for / will tolerate. So I could have a brilliant entry signal on the FTSE100 on TA indicators, but if I make a plan to hold it until I have either 500pts profit or price hits a 250pt stop-loss, I'm going to have a bloomin long wait.

 

[Bakez]

Trading by trying to anticipate the direction the market will take on news is like motor racing in fog. You can see someone coming up fast behind and are tempted to speed up to keep a lead on them: but you can't see which way the next corner leads and eventually - bam!

Its more rational to let the market lead the way and get on the trend as they go past. You will be able to see clearly if its time to go long or short to enter, and you should see some warning notice if the trend starts to weaken so you have time to get out.

Another way to approach this is to set a buy order and a sell order outside the recent range of a price when some key news is expected. The market moves the price towards one of your orders and as soon as its triggered you are automatically in the right trend and the other is cancelled, or you could use it as a stop.

Daytrading on news puts you head to head against several thousand full time experienced professionals. Its just as rational and a lot easier just to trade on the intraday chart signals. There is no point trying to analyse at 5:30 what the market will do today if your first entry will be after the establishment of a trend and will only last 20 minutes anyway.

In short-term trading, too much emphasis is given to the type of entry signal. On short timescales, the exit is paramount, not the type of entry signal, plus the movement you hope for / will tolerate. So I could have a brilliant entry signal on the FTSE100 on TA indicators, but if I make a plan to hold it until I have either 500pts profit or price hits a 250pt stop-loss, I'm going to have a bloomin long wait.

So you suggest waiting to see which way the market will take the news? But you wait 15mins after opening and the stock that just released great news about has already jumped 5-10%? Where is the potential to then trade that?

 

[tomorton]

If you really want to trade this way, you have two options -

1. place buy and sell orders beyond the price range before the market opens, then whichever way the move goes one of your orders should be triggered - or

2. play the trend - but there are a range of strategies here. The idea is to be not long in a downtrend, not short in an uptrend. So either jump in at the first chance but at the risk of chasing the price as it starts to weaken - so use a good stop loss and don't take your eyes off price. Or wait for a conslidation phase or retracement, when you might get in without overpaying, possibly even at a discount, and before price starts to resume its movement again.

Sometimes stocks do move 10% in 15 minutes, and it is annoying to miss the move. But do the stocks that you trade really do that? Surely they consolidate, possibly retrace, then continue? I think you will find it very challenging to trade anything that spikes 10% in 15 minutes then reverses.

 

[Bakez]

If you really want to trade this way, you have two options -

1. place buy and sell orders beyond the price range before the market opens, then whichever way the move goes one of your orders should be triggered - or

2. play the trend - but there are a range of strategies here. The idea is to be not long in a downtrend, not short in an uptrend. So either jump in at the first chance but at the risk of chasing the price as it starts to weaken - so use a good stop loss and don't take your eyes off price. Or wait for a conslidation phase or retracement, when you might get in without overpaying, possibly even at a discount, and before price starts to resume its movement again.

Sometimes stocks do move 10% in 15 minutes, and it is annoying to miss the move. But do the stocks that you trade really do that? Surely they consolidate, possibly retrace, then continue? I think you will find it very challenging to trade anything that spikes 10% in 15 minutes then reverses.

It's not exactly a rare occurance in the FTSE350.. I have seen a lot of stocks jump 5-10% in the first 30mins after opening on the release of a trading statement. Yes they sometimes do retrace and then continue, or retrace and never return to that high at all. Predicting whether a share price will go up or down is one thing.. predicting by how much is another. I simply don't see how I would ever trade that, you are putting money in AFTER the spike has happened. Even if you put your money in when the price has spiked 3-4%, what exactly are you hoping for? It's not every day you see companies rising by 15, 20%... so you'd be going in hoping to catch just a few % more. Remember in day trading the stocks are only held for a few hours maximum.

 

[tomorton]

I don't understand your position. Is news trading something you do, somethng you'd like to do or something you don't think you ought to do?

 

[Bakez]

I don't understand your position. Is news trading something you do, somethng you'd like to do or something you don't think you ought to do?

Something I do on a demo account, and will/looking at doing for real.

 

[ektrader]

In my experience, most of the time you can safely short these news rallys.

Hi Bakez,

I've read your posts and I'm not trying to disrespect you but you sound ameteurish and the LIVE market will treat you as such. Just make sure you know what you're doing. Trying to trade the news on a company is a dangerous game and the smart money has made there moves much further in advance than a 15 minute delay in time (days, weeks, months, etc.....). Also you can't consider a trade successful if your transaction costs eat up the majority of your profits.

Happy Trading

Ektrader

 

[Bolimomo]

I am considering (I have for some time) doing day trading on my own account as a living.

I work as a Construction Manager (30 years) and I have had enough of it.

I am intelligent and can rationalise. .....

I agree with ektrader. Let this be a rude awakening to you. You probably don't like hearing it now, but perhaps one day you look back you might thank us for trying to stop you from losing thousands upon thousands of pounds.

You are attempting to take a big leap. Day trading is the hardest maneuver of all of trading. You haven't been trading at all and now want to jump at it with both feet - at the hardest level. This is like someone who haven't skiied before and now want to take the lift to a double-diamond trail.

Intelligence and logic are not necessarily good traits in trading. Let alone in day trading. I had been an engineer and a computer programmer for decades. I have 2 master degrees. You know what? I had to de-program myself on my years of training of being "rational" to finally be good at trading. There is no shortage of engineers, PhDs, MDs, lawyers who came to the stock market trying to make money and only to be slaughtered. A rational being always have to ask "why, why, why". In trading, there is no "why". If a stock moves, it moves! Don't ask why. Trade!!! When you finally know the "why", it's too late. A rational being would always think "a stock has gone up so much, it must come down". Or "LEH has gone down from $60 to now $10, it must be a good buy! I would just buy some now... I have 2-3 years... I can wait it out... I am going to wait until it reaches $60 again". Or those who shorted Yahoo or Google on their meteoric rises. "Prices are never too high to begin buying or too low to begin selling." - Jesse Livermore. Does this sound rational?

Getting tired of your day job is not a good enough reason to switch to day trading. You have to love trading for what it is, and be willing to do whatever it takes to survive in this game.

Most traders lose money in the first few years before they learn the rope. Through perseverance, gradually turn and become consistently profitable. The learning curve can be long or short, depending on the individual. If someone tells me he starts off being profitable right from the start, I would never ever believe that.

Are you ready for that?

And... trading for a living based on "news" you see on TV - it's laughable, that's what sheeps do. If you don't know what "sheeps" are... look it up.

 

[Bakez]

We don't trade based on the news we see on TV? We trade based on proper trading statements and reports directly from the companies.

I know a trade where transaction fees eat up almost all of the profits isn't sucessfull, but at least I got in there, picked the right stock and at the right time with the pressure of real money rather than demo money over my head.

And are you suggesting that you completely ignore economic data and company news or accounts when trading (note: not the stuff you see on tv) when trading companies in the FTSE350?

 

[ektrader]

We don't trade based on the news we see on TV? We trade based on proper trading statements and reports directly from the companies.

I know a trade where transaction fees eat up almost all of the profits isn't sucessfull, but at least I got in there, picked the right stock and at the right time with the pressure of real money rather than demo money over my head.

And are you suggesting that you completely ignore economic data and company news or accounts when trading (note: not the stuff you see on tv) when trading companies in the FTSE350?

Hi again Bakez,

I don't know if you're refering to me or Bolimomo but to answer your questions:

In this day and age (especially after what's happened in the past 8 or 9 months) you still put faith in company reports?! Especially ones that come directly from the company!?

Yes, I give you credit for stepping in the market and taking your lumps like a man, but don't consider that trade successful. Just learn from it.

As far as news and economic data is concerned, I don't really follow that closely. I'm from the US so I'm not that familiar with the FTSE350. Truth is, trading is trading. I trade Index futures. In my opinion, it's a lot easier to gauge the sentiment of the entire market (S&P, DOW 30, NASDAQ, Russel2000 etc.....) for one day as opposed to brainwrestling with financial mumbojumbo of one company that's probably lying to you anyway. Nothing is wrong with individual stocks, I just think futures and FX are more profitable and practical for daytraders.

Happy Trading

Ektrader

 

[Bakez]

Hi again Bakez,

I don't know if you're refering to me or Bolimomo but to answer your questions:

In this day and age (especially after what's happened in the past 8 or 9 months) you still put faith in company reports?! Especially ones that come directly from the company!?

Yes, I give you credit for stepping in the market and taking your lumps like a man, but don't consider that trade successful. Just learn from it.

As far as news and economic data is concerned, I don't really follow that closely. I'm from the US so I'm not that familiar with the FTSE350. Truth is, trading is trading. I trade Index futures. In my opinion, it's a lot easier to gauge the sentiment of the entire market (S&P, DOW 30, NASDAQ, Russel2000 etc.....) for one day as opposed to brainwrestling with financial mumbojumbo of one company that's probably lying to you anyway. Nothing is wrong with individual stocks, I just think futures and FX are more profitable and practical for daytraders.

Happy Trading

Ektrader

It doesn't matter if the company reports are true or not. I am just predicting the way the market will react to it... Like with Barclays a few weeks ago declaring that they won't be seeking any more government help/bail out sent the price spiking up. It doesn't matter if they are lying or not you are not in it for the long term future.

To be honest I am looking at spread betting as I'm only willing to risk a small amount at this stage and I reckon these companies will get the trading statements/reports and adjust their prices on the stone wall obvious ones before the market opens so you can't absolutely rape them. I am reading about trading currency pairs and indexes with heavy use of charting and analysis for this reason and will probably wait a while using a demo account on the methods I've read about before I start.

Trading on 'company news' has turned 100k into 500k.. but when I actually did trade with real money the pressure and my heart rate was through the roof compared to that.

 

[ektrader]

Well, when you do realize that trading the indexes' is the way to go for daytrading. Learn to trade price action first before relying heavily on charting packages and indicators. This will GREATLY excel your learning curve. Also, be aware that you can take advantage of the volume spikes and make more money trading the FTSE350 futures (or some other derivative) the same way as the individual stock, but with much lower transaction costs.

Happy Trading

Ektrader

 

[GCC]

I work as a Construction Manager (30 years) and I have had enough of it.

I am intelligent and can rationalise. I watch BBC World Business Report at 5.30am each moring, and have an idea which way the news items will affect certain company's shares. Then I note that instaed of them going down (on bad news) or up (or good results) they go up on bad news (because it was not AS BAD as expeected) and down on good news because people had thought it would have been better.

If metals prices for example go up, mining stocks have been known to go down on future "fears".

It does seem that there is a heard mentality in this and that day trading owes more to the day trend irrespective of any real fact, than it does to informed decision making.

I am now in the blue for the first time since I stared buying last November even after losses from buying Woolworth (based on Alan Sugar buying them!) and a duff mining stock Daily Mail Midas recommended!

I have had a good week with AVIVA, L&G and Xstrata even though the FTSE has only risen a few points each day, these shares have gone up double fugures.

I am now looking at what Stop Loss I shoudl set for the first time.

I completely agree with ektraders and the like, that may be you are not yet ready to take day trading serious.

Firstly, NONE of the above qualities you listed help you to daytrade. You don't have to be intelligent or whatsoever, you just have to understand when to hold on and when to duck, which takes experience.

Secondly, your whole approach is wrong. NO daytraders trade according to news, reports, fundamentals, etc. They trade them only because the curves tell them to. Unless you are so-called "long-term investors" you should never look at these things.

And look, you don't even have a clue how to set a stop loss!

I would suggest you to start a demo account and daytrade anything in the Japanese Market (Nikkei, USDJPY, etc) since the Asian timezone may be convenient for you after work. It's the same for me, I live in Asia and trade the New York market at night. Try to demo for a year before deciding whether daytrading is for you.