day trading: keeping busy

The market since Jan 08 has not exactly been on fire. The majority of my friends that trade stocks for a living have all said the same thing, “gotta grind it out right now.” Ok so that being the case what should a new trader be doing while the market is in a funk? Of course new traders are hungry to place trades and earn enough money so they can quit their night jobs, but what are they supposed to do when literally nothing is obvious for hours at a time?

Ask questions to the senior traders or mentors you have. Cycle through stocks or sectors you normally don’t trade but see if you can spot order flow. Spend time looking at price action, what is the phase you are in? Trend or pause? Are you in break out mode because you are consolidating or are you trending?

Look for swing trades. Look at daily charts and see if any swing trade from last night followed through. If it did could you have built a nice position that you could be sitting on right now?

The point is this. Do NOT sit there bored complaining the market isn’t moving!! You should be at your desk at least 8 hours every trading day, use it wisely. Use it to learn. Remember a very important fact that most people in this industry have a hard time understanding, you are not being paid for your time. You are not being paid dollars per hour by the market. You are earning a living for your skill as a trader.

We are always looking for new talent to trade our capital. If you think you have what it takes to trade as a professional trader send us an email inquiry info@keystonetradingconcepts.com

 

day trading: trading with urgency

When day trading for a living it is crucial you understand that you are trading for the month, NOT by the hour. You are not trading time for money with the job market, you are using skills to earn money from the stock market.

It is imperative that you get out of your head the result of any one particular trade. If you manage risk properly (translation: keep small losses small) and internalize the fact that your number one job is to preserve capital for the opportunities that “line up” so you can build a position as it moves in your favor.

GET OVER TRADING TO BE RIGHT! GET OVER IT NOW OR YOU WILL NEVER MAKE IT AS PROFITABLE TRADER. Your job as a trader is to manage risk. Taking losses is a HUGE part of the business. Get comfortable with it.

Whats the big deal about taking a bunch of small losses? Stop whining your timing is off! Small loss, small loss, small profit, then one big trade. thats the reality of trading.  Keep yourself in the game while you are gaining experience. Thats how a professional makes a living. Anyone who tells you they always make money is lying. Trade with a sense of urgency while managing your losses. Trade as if you must pay your bills from the first month of trading profits, that means trying to NET money. That means preserving capital.

Preserving capital is not trading scared. It is smart business. The market offers abundant opportunity for you to make a wonderful living as a trader, your job is to make sure you are in the game long enough to gain experience and an understanding of those opportunities to increase leverage.

day trading: taking whats available

It would be great if every day was a “buy at the low of the day and sell at the high 6.5 hours later or sell short at the high and cover near the low” type of day. Unfortunately that is just not reality. The market as a whole has been basically in a trading range since the beginning of the year (yes I know you can point to one or two commodity or oil related sectors).

As a trader who actually earns a living from the markets you should know if you are trading for short term moves or waiting patiently for an obvious trend to develop where you can build a position and hold it for a few hours or days. It is difficult to switch from one to the other on the fly. You can’t be a power hitter and a singles hitter, it doesn’t work that way.

However if the trend or better put, lack of trend is persistent over a prolonged period of time you may have to adjust to taking what the market is offering. During a trending evironment you should be trading less shares expecting volatility which means you will need to give your stocks some room to breath for the “bigger move.”

During a range bound environment you should be trading more shares per trade for a smaller move with very well defined stop loss areas, there will be no working an order. This may not suit your personality to trade these smaller moves, thats fine but remember you will need to be very patient waiting for a trend. You can take what the market is giving or sit back and wait for the conditions to match your trading plan.

day trading for a living

Sometimes it can just be a tweak here or there that can make a difference in a traders career. Last month I had a conversation with a trader who was struggling to make consistent money. As a matter of fact he was losing money steadily, his trading was all over the place.

We did an analysis of his P&L and I couldn’t believe what I saw, he traded over 100 stocks this month and we still have a week left in the month! One of the topics you will very rarely see in a trading book is to learn the personality of the stocks you are trading. Why you ask? Isn’t a chart set up just a chart set up? Well, yes and no.

One of the biggest secrets of making consistent money is understanding when to use more leverage. Contrary to rookie trader belief is trading the same share size every trade. When you learn the daily characteristics of how order flow is traded intra day you will know the scenarios to step up your size and just as important when to pull it back.

I told this trader to pick a sector or two and to pick 5 stocks he trades no matter what. So basically he was watching about 15 stocks for the entire month. His first reaction when I told him to do this was that he would be “too restricted.” I told him have faith.

I am happy to report this month he will take home a trading check but more importantly he is understanding how to run his trading business with confidence. He is focused.

day trading outlook

Yesterdays 400 plus point rally in my opinion was nothing more than short covering. The new trader will automatically think a big up day is always big buying. You have to analyze data in relation to its price action.

When you hear “short covering rally” it means the commentator is trying to tell you we are in a down trend. We will most likely get follow through to the upside today and then I will be looking for a spot to get short again.