Intraday Trading Ebooks
Learn more about purchasing Kindle eBooks. It is said that you cannot make money in intraday trading. Trading the stock market, like a renowned trader said, is analogous to a 3-legged stool. The three mandatory essentials in trading are: 1. Money Of these, the first, Mind, is the most important. If you do not have a trader's attitude and mind-set, no trading method or capital will make you a good trader.
Day trading – the act of buying and selling a within the same day, or even multiple times over the course of a day, taking advantage of small price moves – can be a lucrative game. But it can also be a dangerous game for those who are new at it or who don't adhere to a well-thought out method.
Let's take a look at some general day trading principles and common day trading strategies, moving along from basic tips you need to know to advanced strategies that can help you learn how to day trade like a pro. If you're looking for a more in-depth option, taught by a 30-year veteran of the industry. Day Trading Tips You Need to Know 1) Knowledge is Power Not just knowledge of basic trading procedures, but of the latest stock market news and events that affect stocks – the Fed's plans for interest rates, the economic outlook, etc. Do your homework; make a wish list of stocks you'd like to trade, keep yourself informed about the selected companies and general markets, scan a business newspaper and visit reliable financial websites on a regular basis. 2) Set an Amount Aside Assess how much capital you're willing to risk on each trade (most successful day traders risk less than 1-2% of their account per trade). Set aside a surplus amount of funds that you can trade with and are prepared to lose (which may not happen) while keeping money for your basic living, expenses, etc. 3) Set Aside Time, Too Day trading requires your time – most of your day, in fact.
Don’t consider it as an option if you have limited hours to spare. The process requires a trader to track the markets and spot opportunities, which can arise any time during the trading hours.
Moving fast is key. 4) Start Small As a beginner, it is advisable to focus on a maximum of one to two stocks during a day trading session. With just a few stocks, tracking and finding opportunities is easier. 5) Avoid Penny Stocks Of course, you're looking for deals and low prices. But keep away from. These stocks are highly and chances of hitting a jackpot are often bleak. 6) Time Those Trades Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, contributing to price volatility.
A seasoned player may be able to recognize patterns and pick appropriately to make profits. But as a newbie, it is better to just read the market without making any moves for the first 15-20 minutes.
The middle hours are usually less volatile while the movement begins to pick up towards the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first. 7) Cut Losses with Limit Orders Decide what type of orders you will use to enter and exit trades.
Will you use? When you place a market order, it is executed at the best price available at the time; thus, no “price guarantee.” A limit order, meanwhile, does guarantee the price, but not the execution. Limit orders help you trade with more precision wherein you set your price (not unrealistic but executable) for buying as well as selling. 8) Be Realistic About Profits A strategy doesn't need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. The point is, they make more on their winners than they lose on their losers. Make sure that the risk on each trade is limited to a specific percentage of the account, and that entry and exit methods are clearly defined and written down.
9) Stay Cool There are times when the stock markets test your nerves. As a day trader you need to learn to keep greed, hope and fear at bay. Decisions should be governed by logic and not emotion. 10) And Stick to The Plan Successful traders have to move fast – but they don't have to think fast.
Because they've developed a trading strategy in advance, along with the discipline to hold to that strategy. In fact, it is far more important to follow your formula closely than to try to chase profits. There's a mantra among day-traders: 'Plan your trades, then trade your plan.' Day Trading Like a Pro: Deciding What to Buy Day traders seek to make money by exploiting minute price movements in individual assets (usually stocks, though currencies, futures and options are traded as well), usually large amounts of capital to do so.
In deciding what to focus on – in a stock, say – a typical day trader looks for three things:, and trading volume. Liquidity allows you to enter and exit a stock at a good price (i.e.
Tight, or the difference between the and ask price of a stock, and low, or the difference between the expected price of a trade and the actual price). Volatility is simply a measure of the expected daily price range—the range in which a day trader operates. More volatility means greater profit or loss. Trading volume is a measure of how many times a stock is bought and sold in a given time period (most commonly, within a day of trading, known as the - ADTV).
A high degree of volume indicates a lot of interest in a stock. Often, an increase in the volume of a stock is a harbinger of a price jump, either up or down. Once you know what kinds of stocks (or other asset) you are looking for, you need to learn how to identify – that is, at what precise moment you're going to invest. There are three tools you can use to do this:. Real-time news services. News moves stocks; subscribing to such services tell you when potentially market-shaking news comes out. ECN/ Level 2 quotes. ECNs are computer-based systems that display the best available bid and ask quotes from multiple market participants, and then automatically match and execute orders. Level 2 is a subscription-based service that provides real-time access to the NASDAQ composed of price quotes from registered in every -listed and Bulletin Board securities.
Together, they can give you a sense of orders being executed in real time. Intraday candlestick charts. Provide a raw analysis of.
(More on these later.) Day Trading Like a Pro: Deciding When to Sell Before you actually jump into the market, you have to have a plan for getting out. Identifying the point at which you want to sell an investment is called Identifying a.
Some of the most common price target strategies are: Strategy Description Scalping is one of the most popular strategies. It involves selling almost immediately after a trade becomes profitable. The price target is whatever figure that translates into 'you've made money on this deal.' Fading involves after rapid moves upward. This is based on the assumption that (1) they are, (2) early buyers are ready to begin taking profits and (3) existing buyers may be scared out. Although risky, this strategy can be extremely rewarding.
Here the price target is when buyers begin stepping in again. Daily Pivots This strategy involves profiting from a stock's daily volatility.
This is done by attempting to buy at the low of the day and sell at the high of the day. Here the price target is simply at the next sign of a reversal, using the same patterns as above. Momentum This strategy usually involves trading on news releases or finding strong trending moves supported by high volume. One type of momentum trader will buy on news releases and ride a trend until it exhibits signs of reversal. The other type will fade the price surge.
Here the price target is when volume begins to decrease. In most cases, you'll want to exit an asset when there is decreased interest in the stock as indicated by the Level 2/ECN and volume. Day Trading Pro Tips: Charts and Patterns Previously, we mentioned three tools for determining entry points – that is, deciding the opportune moment you're going to buy a stock (or whatever asset you're trading). The most technical are intraday candlestick charts. We'll focus on these factors:.
Candlestick patterns, including engulfings and. Technical analysis, including and. Volume, as in increasing or decreasing volume. There are many candlestick setups that we can look for to find an entry point.
If properly used, the doji pattern (highlighted in yellow in Figure 1) is one of the most reliable ones. Figure 1: Looking at candlesticks - the highlighted doji signals a reversal. Typically, we will look for a pattern like this with several confirmations:. First, we look for a volume, which will show us whether traders are supporting the price at this level.
Note that this can be either on the doji candle or on the candles immediately following it. Second, we look for prior at this. For example, the prior low of day (LOD) or high of day (HOD). Finally, we look at the Level 2 situation, which will show us all the and order sizes. If we follow these three steps, we can determine whether the doji is likely to produce an actual turnaround and we can take a position if the conditions are favorable. Day Trading Pro Tips: How to Limit Losses Trading on means that you are borrowing your investment funds from a brokerage firm. When you trade on margin (and bear in mind that margin requirements for day trading are high), you are far more vulnerable to sharp price movements.
Margins help to amplify the trading results – not just of profits, but of losses as well, if a trade goes against you. Therefore, using, which are designed to limit losses on a position in a security, is crucial when day trading. A stop loss order controls risk. For a stop loss can be placed below a recent low, or for above a recent high. It can also be based on volatility: For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry in order to gives the price some space to fluctuate before it moves (hopefully) in your anticipated direction. Define exactly how you will control the risk on the trades. In the case of a triangle pattern, for example, a stop loss can be placed $0.02 below a recent swing low if buying a, or $0.02 below the pattern.
(The $0.02 is arbitrary; the point is simply to be specific.) One strategy is to set two stop losses:. A physical stop-loss order placed at a certain price level that suits your risk tolerance. Essentially, this is the most money you can stand to lose. A mental stop-loss set at the point where your entry criteria are violated. This means that if the trade makes an unexpected turn, you'll immediately exit your position. However you decide to exit your trades, the exit criteria must be specific enough to be testable – and repeatable. The Bottom Line Day trading is a difficult skill to master, requiring as it does time, skill and discipline.
Many of those who try it fail. But the techniques and guidelines described above can help you create a profitable strategy, and with enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds. There is one final rule we should mention: Set a maximum loss per day that you can afford to withstand – both financially and mentally. Whenever you hit this point, take the rest of the day off.
Stick to your plan and your perimeters. After all, tomorrow is another (trading) day. If you want to learn proven, profitable strategies you can start using today, from an experienced Wall Street trader, then check out.
I don’t do much day trading anymore as it’s incredibly difficult to find profitable intraday trading techniques. For one thing, it’s very hard to compete against all the algorithmic machines, banks, and high frequency traders. For another, I prefer to trade mechanically and it’s almost impossible to come up with a profitable intraday trading system. Once commissions and are taken care of, most intraday trading systems fail. And even if you do find an edge, it usually won’t last long.
Because of this, I believe it’s better to use on longer timeframes. For shorter timeframes, I believe traders are best advised to utilise both a mechanical and discretionary approach.
You can use a profitable or break-even trading system as a base, then use your experience and intuition to choose the best trades to take. I call this approach ‘‘. Because, if you can combine the human mind with the computer, it gives the best chance of success.
(And this is how humans were able to beat some of the most sophisticated computers playing chess). This is the essence of how I trade and I maintain a number of short-term and long-term trading systems which I use to manage my portfolio. These strategies have been tested on historical data and work during different types of market conditions. As well as this, I keep a separate pot of capital available to capitalise on short-term, intraday opportunities when they arise. What I never do anymore is watch the screen all day.
I simply don’t enjoy watching price charts move for hours and find this an immense waste of time. Especially when there are so many more fulfilling things you could be doing with your life. That’s why I use these and I spend less than an hour each day updating and organising my trades.
Chart reading is a skill But don’t get me wrong, chart reading is a definite skill and if you want to be a good day trader, then you will definitely need to put in some serious screen time. It takes a lot of practice to become adept at reading charts and I believe the most important aspect of this is watching how the charts react to certain events. This is what I have had the most success with during my time, and in my mind, this is the key behind predicting future price moves. But now let’s get into my four favourite intraday trading techniques. These are the ones I’ve had the most success with in the past: Intraday Trading Techniques 1 – Pivot levels Before I worked at a trading firm I had never heard of pivot points but these days I think most traders know about them. Pivot levels go right back to the days of the trading floor and before the decimalisation of securities but they’re still used today by lots of intraday traders.
Intraday Markets
Because so many day traders and ‘locals’ look at pivot levels, they provide excellent levels of support and resistance in the market. Everyone is looking at them which means they are more likely to provide significant turning points.
They have a simple which is calculated using yesterday’s prices and this means that the levels constantly adapt to the market. I’ve worked at two day trading firms now and in both companies, traders would look at pivots. Even if they didn’t directly trade off pivots, all the traders had an idea of where they were and what could happen when a pivot point was approaching. How to use pivots intraday Always remember that the pivot is the most important level. When the market is above the pivot it’s a bullish signal and when the market is below the pivot, it’s bearish.
Accordingly, some traders will only buy when the market is above the pivot, and they will only take short trades when the market is below the pivot. The other support and resistance levels are usually very good levels to take profits and manage the trade. Occasionally, when the market is particularly overbought or oversold (look for a or momentum score) the levels can be used to take reversal trades.
Pivot level Example Take a look at this recent example in EURUSD. You can see that the market touches the key pivot levels regularly; pivot, R1, R2, S1 and S2 particularly. Traders know where these levels are so they often take their profits and make their trades around the same place.Charts courtesy of. One strategy?
Buy when the market pushes through the pivot with conviction then take half of your position off at R1, and try to sell the rest at R2. You can keep your stop below S1, and use the distance between S1 and your entry to calculate your position size (based on an attractive risk:reward ratio). For example, if the difference between your entry and S1 is 30 pips, you could make your profit target 60 pips away, looking for a 2:1 risk:reward. You can use the levels to further fine tune your best exit points. Also, keep an eye on momentum and other indicators like RSI, moving averages and Bollinger Bands.
As you can see from the next chart, if RSI is overbought and the market is at a resistance level (like below) that’s going to be a good time to sell. Similarly, if RSI is oversold and the market is at a support level, that’s an extra reason to buy. In and I test these levels using historical data to see if a good trading system can be developed. Check it out when you have the time. 2 – Trading The News Another effective method for intraday trading is to trade news releases and economic reports. When a positive piece of news comes out you want to buy the market and when a negative piece of news comes out you want to sell. Of course news trading isn’t as easy as it sounds, especially when you’re a retail trader and banks and hedge fund traders have access to all the quickest news feeds and inside sources.
High frequency trading (HFT) algorithms, for example, are able to analyse and react to economic reports in a split second, making it impossible to compete. The solution then is to stick only to the biggest news releases that actually move markets and to use your intuition to take the best risk:reward positions. In some cases you may want to take a position before the news item comes out. That way you may be able to manage your trade and get in before the move. Again, it’s not easy but big profits can be made if you get on the right side of the trade, as proved by these and made millions.
All about probabilities Predicting the outcome of economic releases or earnings reports might not be possible but it is possible to analyse price action and to make careful risk-based bets. For example, if a strong, positive, piece of news comes out and the market struggles to go up as it should, that’s an important sign that should be taken account of.
In this instance, price action is suggesting that there are not enough buyers, even though the market has just had good news. That means resistance, and when the good news wears off, or when bad news comes out, the market could easily fall.
Being able to interpret price action in relation to events is absolutely key. Just recently, US non-farm payrolls came out worse than expected but the market barely budged. Because there simply wasn’t enough sellers to take the market lower. Markets take the line of least resistance, so when the bad news had been fully absorbed the market ended up going higher. Which news releases to watch for intraday trading Plenty of news releases have no effect but the best news releases for futures traders are listed below: – Non-farm payrolls (Average USD pip movement of 100-150 pips) – Central bank announcements (interest rate decisions especially) – Retail sales (Average 80 pips) – US Trade balance (Average 70 pips) – US CPI (Average 70 pips) The key with news trading is not to follow market sentiment; you need to work out what the market is expecting and if need be take a position against the crowd – if the probabilities are in your favor. For example, if the market is pricing in a 70% chance that the Fed will raise interest rates and you make it to be just a 25% chance, then going against the market offers a trade with great risk:reward. News trading can be profitable but generally it requires quick thinking and a bit of preparation.
Whatever it is, it’s always best to try it out for a while on a trading simulator. Quantpedia If you are interested in more news and event-driven strategies you may want to check out which has a database of over 200 quantitative trading strategies for stocks, currencies and futures. There are strategies based on events as well as longer-term methods and this is one of my favourite resources for finding trading ideas. 3 – Scalping Scalping requires skill but is one of the most popular intraday trading techniques. The scalping method is to take lots of trades with short holding times, hoping to capture one or two pips here and there, building them up as you go.
Increasingly, traders use algorithms to calculate minute inefficiencies in the market and scalp a couple of ticks here and there, particularly in the forex markets. It goes without saying that scalping requires extremely tight spreads, a lot of practice and a lot of skill. If you get involved in scalping it’s also a good idea to sign up with a as you can get back some of your commissions that way. But I would certainly stay away from any intraday trading system that claims to scalp the markets as it’s probably not true.
I’m not a huge fan of scalping as it’s generally a technique that requires a lot of screen time and discipline. It’s not uncommon to see scalpers build up a month worth of profits and wipe them all out on a couple of moments of weakness. 4 – Unforeseen events Often, short-term trades are no better than a coin flip and you would have just as much success going to the casino and betting on black at the roulette table. However, another time that I will engage is if I see an opportunity come up that is too good to miss. For example, maybe a stock has been sold too aggressively on a bad earnings number, or maybe there’s been a natural disaster, or a shock event. There are opportunities in these trades but they don’t come around that often.
They usually involve a great amount of uncertainty and emotion. So the key is usually to take a contrarian position (trade the other way to everybody else) then stay disciplined and try not to budge.
Examples For example, the massive sell-off in USD/CHF in January 2015 when the Swiss national bank removed exchange controls against the euro and the franc rallied by historic proportions. This was an unforeseen event that caught many forex traders by surprise and sent some forex companies into liquidation. But as you can see from the chart, there was also a massive over-reaction (due to forced selling) and taking the opposite side of the trade the very next day would have been the perfect time to buy. As is clear, markets often overreact and it often pays to go the other way. As another example, remember the flash crash of 2010 when the S&P 500 dropped almost 10% in a matter of minutes. This would have taken out many traders but if you were alert and on the sidelines, you may have been able to jump in and make a quick profit when the market rallied off the seemingly oversold position.
Intraday Trading Techniques
Finally, here’s a chart of the Japanese Nikkei after the tragic earthquake and tsunami in 2011: At the time, there was widespread panic, devastation, chaos, and everyone sold their Japanese holdings out of fear. It’s not nice to profit off of a natural disaster, but if you had said at the time “I think this is a bit overblown, I think Japan will be alright” you would have made money buying the dip. And in a way, you would have helped support the country in it’s time of need.
Looking back, the Nikkei did end up revisiting those lows but at the time of the disaster, there were fast profits available for intraday traders reacting to events. Additional resources – See my post: for even more intraday trading ideas. – See an example of an. – You may also like my list of the for beginners. Please consider sharing this if you found it useful and sign up for my to get updates and discounts. Thanks for reading!
Intraday Trading Tips
JB Marwood Independent trader, analyst & writer JB Marwood is an independent trader and writer specialising in mechanical trading systems. He began his career trading the FTSE 100 and German Bund for a trading house in London and now works through his own company.
He also writes for Seeking Alpha and other financial publications. Please remember financial trading is risky and you could incur significant loss of capital.
Nothing on this site is to be construed as personalised investment advice. Please see the full disclaimer.