Surviving
The Game
Are you ready for the truth about your
current obsession with the markets? While exact figures remain closely
guarded by the industry, the failure rate for day traders is well over
75%. So chances are very good that you’ll eventually lose all or part of
your equity account and move on to a less stressful hobby. To avoid this
fate, you need to quickly find and execute a trading strategy that takes
full advantage of the unique characteristics of the intraday markets.
The fascination with short-term
positions lies in the more favorable time/profit curve. Volatile intraday
movement produces sharp price swings that will "average out"
over the time frame of the traditional buy and hold strategy. As a result,
effective time management becomes extremely important in day trading.
Learn the distinctive traits of each
part of the market day. Intraday time segments contain repeating cycles
that must be considered before trade execution. For example, don’t chase
opening hour excitement without understanding the specific risks. Early
opportunities often disappear as soon as you see them. And avoid buying
weakness in the last hour if price is below key support. Time of day
favors painful declines for issues near their lows near market close.
Watch the clock and become a market
survivor. You’ll develop an intuitive sense of how your positions will
react as time responds to intraday cycles.
Successful day traders recognize high
probability positions that exploit individual quirks of market behavior.
Trader and educator Linda Bradford Raschke mentions a friend that makes a
good living by selling 5-min ledge breaks on the S&P500 contract. If
you can give up the excitement of chasing parabolic stocks,
"quiet" day trades may produce a higher percentage of profitable
positions with far less stress.
Focus on optimizing entry and exit. Play
single direct thrusts and manage your position size to control risk. Only
enter part of your position when the signals don’t line up perfectly.
Use discretion, execute wisely and apply this golden rule of swing
trading: over time, excellent entries on mediocre positions make
more money than lousy entries on good ones.
Always use cross-verification in your
trading decisions. When identical entry price converges in several
discontinuous forms of technical analysis, your odds for success are
greatly enhanced. When Fibonacci retracements, moving averages and
trendlines all work together, load your trading gun and get ready to take
quick profits with confidence and ease.
When PMCS reported excellent
earnings, market makers ramped the stock without providing many
opportunities to get on board. They relied on time of day sentiment when
good fills could be avoided or major players were filling their stomachs.
Notice how the first move was completed only 15-min into market opening
and the quiet lunch hour printed the day’s biggest rally.
