Trading platform and strategy review

[Carytrader]

I have started day-trading stocks (in US) for about 45 days now and I have made more than 250 trades during this period. I have been making profits some weeks and losing some. Overall, I am close to zero profit/ loss after 45 days. I want to spell out my strategy and would request your comments and feedback.

TRADING PLATFORM
I use Scottrade Elite platform for day-trading and they charge me $6 per trade - I haven't read anybody else using Scottrade on this forum. I like Scottrade Elite because it provides all the tools (charts, Level II access, etc.) and the trade executions are very fast as well (1-2 seconds). Is there a better trading platform for day trading and can you suggest why? One of the concerns I have heard is that smaller brokers/ trading platforms may not be good for short-selling stocks. My understanding is that for short-selling stocks, the broker (Scottrade, in may case), needs to be able to borrow those stocks from someone else (typically, their other customers) and larger brokers are able to do that better than smaller one. I was considering moving to just2trade.com (for $2.5 per trade commission) or optionshouse.com (for $4 per trade commission), but I am concerned if I won't be able to short-sell and hence not take advantage of the downward stock trend, during day-trading. Comments/ advise?

STRATEGY
I invest typically $10k to $20k per trade and my target is to scalp 0.5 to 1.0 % return on every round-trip trade. I also put a stop loss at 0.5 to 1.0%, typically. In a day, I make 2-6 trades and I trade 2-4 times a week. I have been trading stocks like FB, GMCR, NFLX and ZYNGA.

My strategy is to jump on the trend by analyzing candle charts, volume changes, MCAD chart and RSI charts.

I am learning, and learning fast. My objective is to first demonstrate to myself that I can achieve certain consistency in making money (however small) over a period of 3 months and then scale up from there.

Since I am relatively new to trading, I just wanted to lay open my cards and I would greatly appreciate expert advice from experienced and successful day-traders. If you need more information to better advice me, please let me know and I answer your questions accordingly.

 

[bbmac]

'...My strategy is to jump on the trend by analyzing candle charts, volume changes, MCAD chart and RSI charts....'


So over a 250 trade/45 day duration sample you have basically broken even (is this net of dealing charges?) Assuming it is - over this sample you have no edge or you may have an edge but have not stuck to it's entry/exit/risk/trade management rules over this sample, and/or the edge produces a net over a larger sample ?

Are you sure you have an edge using the 'strategy' you referred to ? How do you know it is an edge ? What is the total sample size and return over which you tested the edge ? Do you know what the strike rate of the edge is (winning trades as a % of total trades) and whether at 1:1 risk:reward the edge has a positive expectancy? What are the other metrics associated with your edge ? ie typical-maximum winning and losing sequences and drawdown etc ? If you don't have an edge it's unlikely you will get much above b/e consistently and it is generally far worse than that.



G/L

 

[Carytrader]

My trading data statistics and charts are as shown in the attachments.

I started day-trading with an objective to make between $100 to $200 per day for the first 90 days. So far I have traded on 22 business days (out of 45 calendar days). I have been making some profits per day in general, except that I screwed up two big losses (of $800 and $700 each!!). I lost both these trades on one single day because I didn't honor the stop losses I had decided upon. I need to improve on following my pre-defined plan and I hear this is the most common problem with traders that lose!

If I ignore those two exceptional losses, I would have made $50 per day (net profit after deducting commissions) on an average. Not great, but it's at-least positive over a 45 calendar day period.

Also, over the last 45 days, I have been fine tuning my skills to identify the trend and it's getting better. I am also figuring out to stay longer on the winning trade and quit early on the losing trade. That needs some work though.

Apart from the strategy, do you have suggestions for the trading platform to use to minimize commissions? Is selling short really a problem with a trading platform like just2trade.com? Overall, till date, I have made $954, but commissions were $1383 and hence I have a net loss of $341. Clearly, lowering commissions will also add to my profitability!

 

[forker]

As bbmac stated... You need to work on finding an edge you are comfortable trading. I suggest you stop trading cash and work on that until you find something suitable with a good sample size to support the edge through various market conditions. I have several edges I utilise and each designed to work in a particular market condition

 

[Carytrader]

Thanks for pushing me to re-think my strategy and finding an edge. I have been studying my data since I posted it here yesterday and I now realize that I have not found my edge so far. I have been changing/ fine-tuning my strategy over the last few weeks, but I am yet to find a consistently winning game plan.

I will work on finding a winning strategy, first!

 

[Carytrader]

Thanks forker and bbmac for your advice earlier. I have been experimenting a lot more and defining a clear strategy since my last posting (first week of July). I am glad to report that I have finally now found my strategy, for now.

Everyday, I look for the earnings report and identify the stocks that are either going to rise or fall dramatically, jump on that stock and then get a 2-4% cut out of that day trade. This strategy will work during the earnings reporting season - I need to find more strategies for other times of the year!

Without any specific strategy, I lost about $1k in the first 3 months of my day-trading. However, since finding this strategy, I have made more than $8k, in the last 20 days!

Thanks again guys with your feedback.

 

[ronblack]

Random walk trading.