Day Trading Strategies

PATIENCE:

Wait for all the stars to line up! Good things come to those who wait, be it low buy prices or high sell prices. Sometimes if you had only waited, you could have sold higher or bought lower.

Have patience! It's without a doubt one of the golden keys to making money in the stock market. The patient trader has self-control and waits for his indicators to tell him when to enter or exit. Even if the market "appears" to have ended its rally, if it does not meet certain criteria the trader had previously set for himself, he must wait.

REVERSE PSYCHOLOGY:

If patience is the golden key to trading, then the silver key is doing things opposite from the rest of the market! You want to buy when the average investor is selling and driving the price down. And when good news is driving a stocks price higher, you want to sell your shares at the over inflated price.

Buying when stocks are falling and selling when they are moving into higher ground is one of the hardest things to learn to do when you first start trading. We don't have the luxury of holding our stocks for years to help iron out the little highs and lows. We live off the little highs and lows! Buy when there is blood in the streets!

EMOTIONS:

The stock market is very good at playing on your emotions. In order to be a good trader, you must look at the market in a cold, hard way. When the masses are selling in a panic, you must stand fast or step up and buy.

Remember that the market is made up of emotional herds buying and selling in waves. You must be the cold, cunning and calculating wolf looking over the herd for your kill. Don't panic sell and don't buy on hysteria.




IF YOU ARE WRONG:

Then you are wrong! Don't try to justify a bad trade by convincing yourself it will turn into a good trade.

If you buy on the high side, then sell at break even and buy back in on the low side. Talking yourself into believing that your mistakes are actually wise moves in disguise is very costly. Be professional enough to spot your mistakes and move on.

PROFITS AREN'T AS IMPORTANT AS YOUR CAPITAL:If you miss out on some profits, that's okay, you can always find another stock to buy.

However, if you lose a big chunk of your trading money then the game is over. Protecting your trading capital is your number one mission, followed, of course by increasing it.

DON'T GET GREEDY:

Greed will make you poor! If you experience an overwhelming emotional urge to take a trade because you are sure to make a killing this time, then you are experiencing greed.

Greed and fear drive the markets and for the most part drive the average investor to making mistakes. Sell with good profits, but don't get too greedy. A savvy trader once said, "Pigs get fat, hogs get slaughtered".

BIG SWINGS:

Big moves up are sometimes followed by big moves down and visa versa. Sell on abnormally large moves to the upside and buy on abnormally moves to the down side.

They are generally out of character of the stock and can many times be followed by a "snap back" on the stock. Knowing your stock's trading habits can be very helpful.

HOT STOCKS:

Stocks that are hot move great, but nothing lasts for ever. If you buy a stock for a big, quick gain and find that the stock has "lost its heat," don't allow your money to be dead -- unless you are looking for an investment!

Sell and move on, don't justify your mistakes - it tends to be a costly justification process in the long run. Others in the stock for the hot ride will start to bail out as the stock cools off and looks like it's not capable of making "hot moves".

JUSTIFICATION IS COSTLY:

Don't hold a losing stock to justify your purchase. If you make an incorrect buy or end up with a stock that is falling when you thought it would climb handle those mistakes quickly.

Do not be tolerant of stocks that are costing you time and money! Get rid of them!


TIME TO BUY:

One of the best times to buy is when a stock is going down on low volume (with no news) as compared to recent increases on higher volume.

This suggests that the selling is lighter and that the holders of the stock that are going to sell have finished selling and the rest are holding.

The sellers of the stocks then may come back into the market when they see the price stabilize. It's also not a bad idea to sell on high volume on the way up, as this usually creates abnormally high prices that cannot be maintained for long.

DAILY VOLUME:

Do not day trade in thinly traded markets, or on stocks that have very low volume. You may find you can't get out of the market as timely as you think.


THE SWITCHES:

Your investment method starts losing, so you switch to another, which immediately also starts losing ...

By switching, you open the door to getting the worst results from each method and none of the good and the overall result can be much worse than even the worst system followed faithfully.

THE DIPS:

You can't take advantage of market dips if you are already in the market. It's better to be out of the market more for day trading than in the market.

This will allow you to get in and out with profits fast and be on the sidelines should dips occur. Try to be out of the market more with your trades and in the market more with your investments!

We are not in the business of predicting, only following the market.

We do not want you to enter at the exact bottom, and we do not want you to exit at the exact top.

We will identify only the change of short term trends within the major trend, and enter or exit at these changes.

If the main trend is up, and the short term trend changes from down to up, then we will buy into the market. Go Long.

When the main trend is up, and the short term trend changes from up to down, then we will exit the market by selling our buy. Close Long.

Conversely, when the main trend is down, and the short term trend changes from up to down, then we will sell the market. Go Short.

When the main trend is down, and the short term trend changes from down to up, then we will buy back our shorts. Close Short.

We will always keep our trades protected with stop losses.
Trading with stop losses is like driving a car using a seat belt. It does not cost anything, but it can save your life in adverse circumstances.

Great Stuff,Sachin.......nice!!

Keep them coming...Keep them coming...Keep them coming... Sachin. Very educative.

Thanks,
nkpanjiyar

Thanks Saint and nkpanjiyar.

Golden words for the day trader to remember.Good going Sachin.
Regards,
Ranga

Nicely said Sachin. That's Day trading in a nutshell. May I add that discipline has got to be tightened during day trading, be it entering, exiting or stopping out. Time is of essence here & reaction times have to perforce be extremely short. Everything gets that much more accentuated when day trading in a volatile market and on days when confusing signals from extraneous factors cloud clear trends.

Day trading is like an ODI with all it's instant excitement & same-day result. This is unlike longer term trades which are akin to a 5-day test match with all it's alternating spells of interest & boredom;and you have a result or maybe not at the end of a 5-day wait. I like the ODIs more, that's why day trading too.

Nice work Sachin and Jaideep!

It will definately be helpful for newbies like me.

Thanks.

great article for day traders.
thanks
Abhay

sachin,
all these articles are nice to read. But no use in real practizing.

For example, you are telling If the main trend is up, and the short term trend changes from down to up, then we will buy into the market. Go Long.

I think 90% of the member in this forum knows "Trend is ur friend", but how many know what is a trend, how to identify that, what is the time period to be considered.????