Chapter 26: Portfolio Diversification
Chapter 27: Options Day
Trading Rules For Success
Chapter 28: Trading With The Trend
Conclusion
I
Introduction
t is essential that you understand and apply all these three elements in
day trading. While some strategies only require technical indicators
(like VWAP and Moving Average), it will help you a lot if you
understand price action and chart patterns, so you can be a profitable day
trader.
This
knowledge, especially about price action comes only with regular
practice. As a day trader, you must not care about the company and its
revenue. You should not be distracted about the mission or vision of the
company or how much money they make. Your focus must only be on the
chart patterns,
technical indicators, and price action.
Successful day traders also don’t mix technical analysis with fundamental
analysis. Day traders usually focus more on technical analysis.
The catalyst is the reason why a particular stock is running. If you have a
stock that is running up to 70%, you need to determine the catalyst behind
this change, and never stop until you figure that one out.
So, it’s a tech company that just got patent approval or a pharmaceutical
company that passed through important clinical trials. These are catalysts
that can help you understand what is really going on.
Beyond this, don’t bother yourself squinting over revenue papers or
listening in conference calls. You should not care about these things unless
you are a long-term investor.
Day traders trade fast. There are times that you may find yourself trading in
time periods as short as 10 to 30 seconds, and can make thousands of
dollars. If the market is moving fast, you need to make certain that you are
in the right position to take advantage of the profits,
and minimize your
exposure to risk.
There are millions of day traders out there with different strategies. Each
trader requires its own strategy and edge. You must find your spot in the
market whenever you feel comfortable.
You must focus on day trading strategies because these really work for day
trading. The following strategies have been proven effective in day trading.
These strategies are quite basic in theory, but they can be challenging to
master and requires a lot of practice.
Also remember that in the market today, more than 60% of the volume is
dominated by algorithmic trading. So you are really competing against
computers. There’s a big chance that you will lose against an algorithm.
You may get lucky a couple of times, but supercomputers will definitely
win the game.
Trading stocks against computers means that the majority of the changes in
stocks that you see are basically the result
of computers moving shares
around. On one hand, it also means that there are certain stocks every day
that will be traded on such heavy retail volume.
Every day, you have to focus on trading these specific stocks or the Apex
Predators - the stocks that are usually gapping down or up on revenue.
You should hunt for stocks that have considerable interest among day
traders and considerable retail volume. These are the stocks that you can
buy, and together, the retail traders can still win the game against
algorithmic traders.