The Successful Day Trader

trades ch2Successful day traders specialize and refine the use of one or two trading techniques and become experts in their execution.

Focusing on one or two strategies will bring repeated success. Every time someone brings out a new strategy, we run to it, hoping for the Holy Grail. Well, I have not found any Holy Grails in my day, but I have identified a number of tactics that bring repeated success.

Knowing how to execute a particular strategy and being able to find the stocks that are ready to move when you want to trade is the most difficult situation facing most day traders.

The Day Trader Experience

There are numerous advantages to day trading as well as disadvantages. Because day traders make more trades than, say, position traders, there are more opportunities for error.

Another disadvantage is that day traders often miss the larger profits earned by swing traders who accept the risk of holding overnight positions.

Successful Day Traders Adapt

Growth for day traders happens in stages. A smart trader will not expand risk tolerance until a certain level of profitability is achieved. When done correctly, the decision is based on actual results. Too many traders make the jump to increased leverage without the data to back up the choice.

Many simply increase trading size because they are pressed for money. This is usually a very bad reason.

As your P&L shows improvement, you can open the risk parameters and consider holding trades that close strongly in your favor. The plan is to to exit on the next day’s open.

Therefore, some day traders let successful day trades develop into swing trades. Confirmed day traders, however, always close their positions before the market closes.

The Primary Benefit of the Day Trade

An advantage to day trading is not holding stocks overnight. In this market, anything can happen which might cause stocks to gap against you at the open. I am wired as a day trader and just hate worrying about a position when the market is closed.

Finally, if you wish to day trade, you should be willing and able to sit in front of a computer all day and monitor a trade. If you cannot, then you can trade in the intermediate or long-term time frames.

If you make this decision, you must make trade adjustments as a swing trader and not a day trader. This means you should not be watching every tick so you don’t micro-manage the position.

When you mix trade goals and trade management you will be stuck in a mindset that will lead to hesitating. To avoid this so you can day trade successfully you must commit to a strategy. If you do, your odds of success increase with this greater clarity.

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Passion4Trading Reply

The proper responsible decision is ALWAYS made in advance for a swing trade designation–WITH THE OPTION TO CLOSEOUT SAME DAY IF THESIS CHANGED…but never the opposite. Risk is REDUCED by closing a swing early…vs risk EXCESS ASSUMED vice versa

Steve Reply

I always read your morning emails and to tell you the truth, it has changed my mindset about day trading a lot. Thanks very much.

    Info Trading Reply

    Hey Steve
    thank you for the kind post
    Please feel free to reach out with any questions

    Have a great day

Jeff Reply

So does the Order Flow Method teach day trading or swing trading?

    Info Trading Reply

    Hey Jeff
    Great question

    The short answer is both, and let me tell you why.
    Great traders, big traders trade with the institutions
    It doesn’t matter if it’s a day trade or swing trade.

    You can absolutely find ideas that look good on a 5 minute or 15 minute chart
    How much time and money was invested that last hour, compared to an obvious order flow, obvious buying or selling over the previous last 3 months

    Breaking it down further…
    Understanding order flow GIVES YOU your trade management

    Here’s how…
    If your stock has obvious buying or selling the previous week, you would have a trade, but not great conviction
    so you would manage for cash flow (quicker trades, you do not scale in our out)

    If you have obvious buying or selling for the previous month (for example)
    MORE REAL MONEY was invested over time

    This gives you a different trade management
    You would look to hold longer and build a position

    Whether day trading or swing trading, you still want to trade with the big money
    The money that MOVES your stocks

    This is what I specialize in and show you how to spot and trade
    If you have any more questions, please reach out

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