Day Trading strategy is a mysterious concept.
We know it should be the bedrock of our trading plan, but what does that mean?
How do you know when you truly, deep-down, believe in your edge? What trigger gives you the conviction?
I will be honest with you. In my 13 years of proprietary trading, most who attempt to become full-time day traders never get there.
Most who venture into day trading need to make money quickly. They don’t give a day trading strategy enough time.
Day Trading Strategy in the Real World
Watch the video to the end if you are struggling with your consistency.
I make it very clear the problem is most likely not your day trading strategy, but your belief in your edge…
Day Trading Strategy from Textbooks
This chart of the SPY ETF is clear, but it would never make it into a trading book.
Authors want you to see the perfect setup. The one that will make you a fortune.
The chart on the left is the two day, five minute time frame. The chart on the right is a weekly chart.
A good day trading strategy will have you focus on the weekly chart for a bias, then zoom in to the 5 minute for entries and exits.
A “bias” means you have committed to one side of the market. This factor is especially important for day trading. Your window of opportunity is small, you need to be on top of your game.
Here is where most traders disconnect from the long-term goal…
For two days the proper trade bias was to be long, which means you should be a buyer. Only a buyer. You should let any other ideas go.
Day one the SPY gave us several signals to be long, and each would have been a loser (Other than small scalps). We were looking long, and lost money.
Day two, we get the move higher in price action on an overnight gap. Now we are pissed. The move we wanted yesterday happened and we were “flat.” In day trading terms this means we had no positions.
The trading universe gives us one 5 minute bull-flag to trade that produce a small winner. Now we are licking our chops ready to make back the small losses from yesterday.
Where Conviction in Your Day Trading Strategy Emerges
The rest of the afternoon on day #2 gives us several signals to get long. We take every trade and they are losers.
This is real trading. This is not the stuff that makes it into most trading books.
So how do you learn from the losing trades? How do you accept the losers as a part of trading?
The answer is think long-term. Not trade-by-trade or day-by-day.
Great traders do not deviate from their strategy. I have witnessed some of the best day traders have enormous negative days following their day trading strategy to the letter.
They never blinked once.
When you earn money consistently using a day trading strategy you believe in. A strategy that proves itself. That is the seed of conviction.
True conviction, the kind that is the bedrock of confidence is when you follow your trading strategy after a few losing days in a row.
That’s when you know you believe. Until the, you are faking it.