Day Trading Strategy
This day trading strategy should be a good starting point for
you. This may not be the exact way you wish to day trade, but it is
intended as a guide to help you determine a day trading strategy that suits not
only your timeframe, but also your personality. Trading in accordance to
your personality will ultimately serve you best. If you prefer a longer
timeframe, please see the
swing
trading strategy page for more information.
Day Trading Strategy:
If you are a day trader, your position size is
likely larger due to the fact you are looking for a smaller move with your short
timeframe. Keeping a tight stop is extremely important when trading larger
size, as a day trading strategy gives stocks multiple opportunities to work.
For day trading, the strategy is rather simple:
-
Always keep your profit objective at least 3
times greater than what you are willing to risk.
-
Allow no more than a 1% move against you from
your entry point. Ideally, you are in the trade beyond the
trend line and
out of the trade below it. You can always get back into the trade if the
stock returns to the buy point.
-
If the futures (Nasdaq and S&P e-minis) make
an intermediate lower high intraday (or higher low when trading the short
side), exit half of your position. This implies a weakening market and
can make it tougher for open positions to continue working.
-
If your stock hits a new low for the day
(long trades) or new high for the day if you are short, exit the position.
A day trade is intended for initial moves, so there is no purpose in
widening stops to accommodate a stock moving in the wrong direction.
Get out if the stock breaks a low (or high if short) as you can reenter the
trade if it triggers again.
-
Once momentum fades and buyers are thinning
out, take your profit. This can be done by carefully monitoring the
intraday chart and the time & sales window for fading momentum.
If you have any additional questions, please see
the FAQ page or contact us.
These guidelines should help any trader with a
day trading strategy to determine exits that fit a day trading timeframe.
These are general guidelines given for the purpose of
trading education, and each individual
trader is responsible for their own exit and trading results.
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