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day trading strategy and development of a day
trading strategy or method.
Now, armed with your description of your trade(s) lets go hunting. Back through the journals of historical chart data, check your trade against price data in the same time frame charts you normally trade with. All this detail work is necessary in your pursuit of a valid day trading
strategy. Look for each and every instance where your trade occurred going back at least one year, several years is better. Be honest, list every trade you either would have or should have taken in accordance with your trade
description, as your day trading strategy depends on this data. Then tally up the winners vs. losers. Also make note about the % that would have lost money even though the trade was a winner. In other words you would have gotten stopped out before the trade went your way. Make note of the
percentage of trades that would have made money even though they were losers. In other words they went your way enough initially to make a little profit, then went against you. By the way, every trade you locate on your charts, be sure to mark for future reference because you will be coming back time and time again to learn more as you develop your sp day trading
strategy.
In the pursuit of developing a day trading strategy and over course of studying your charts and trades to find the
percentage of winning trades you may discover other valuable information. For example; when trade x occurs on Mondays it is usually successful and when it occurs on Fridays it usually fails.
This is just the stuff a successful day trading strategy is made of.
When trade y occurs in a down trending market the short sale works, but when trade y occurs during an up trending market the long usually fails. Trade z tends to work better in the middle of the day than it does in the mornings or near the end of the day. Record these findings in an organized fashion. This is the information that will later become your
day trading strategy trading rules. These are the many different conditions and circumstances that affect the outcome of your trades and
day trading strategy. Hopefully you will learn a lot about your trades. You need to understand them and know them like the back of your hand. Your goal is to increase the winning trade % as high above 50% as you can with out sacrificing other important trade features. In other words, you want your trade
and your day trading strategy to be a winner 65%, 75% or even 85% of the time. You do this by learning enough the characteristics and tendencies about your
trades that will comprise your day trading strategy. Then you determine which of those tendencies affect your trade in a way as to improve it’s profitability, or to increase or decrease the frequency in which the trade occurs. As an example, if a trade you like usually fails when you enter it on Monday, Tuesday, Wednesday or Thursday, but works a very high percentage of the time on Fridays you may choose to make it your rule to only enter the trade on Fridays. Doing so would greatly decrease the frequency with which the trade occurs for you, but will greatly increase the winning percentage of that trade. So you have to find enough characteristics and tendencies about your trade so that you can analyze them and choose the best combination of rules to get the best performance out of that trade.
Again, your
day trading strategy depends on this research.
If in the end you get the frequency, and accuracy of the trade where you want it, then you have a viable enough trade to make it part of your
day trading strategy or system.
Go back to Day Trading System page 1.
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