How to Win the Day Trading Game
The global markets offer everyone from Main Street to Wall Street easy access to the financial markets, but many aspiring day traders are still wondering how to win the day trading game. Day trading is challenging, but if you have the right temperament and the right tools then you can win big in today's stock market. By far, the best way to win at the day trading game is breakout trades on the five-minute chart.
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Things You'll Need
- Access to the Internet
- A real-time data feed
- A pen and pad to record trades
Instructions
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Log onto your real-time data feed and then create a stock list of the S&P 500 next to a five-minute chart.
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Create a link between your stock list and the five-minute chart. This will allow you to scroll down your stock list pulling up each stock symbol on the five-minute stock chart.
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Scan the stock chart for tight price action that fluctuates within a tight base pattern. This tight base pattern should be at least 18 bars long. As you make note of any stocks that fit this pattern, mark them down with your pen on a pad for quick reference.
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Enter the trade as the price action of the stock moves up or down from this pattern on higher trading volume. This move will be explosive as it breaks out from its tight price consolidation, so be ready to jump on board while setting your stop-loss point at below the base of the pattern for a long position or the top of the base pattern for a short position.
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Exit half your position at two times your risk and then use a trailing stop on the remaining half using each successive higher low point as the stop-loss point.
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Tips & Warnings
In trading, like business, you never commit capital until you assess risk and then work to limit that risk. By taking your time and following this process, you don't lose any money until it is proven that your price is ready to make an explosive run but your stop point is clearly defined at the opposite end of the base pattern.
Keep in mind that the only thing easy about money is losing it. If you're willing to lose a little, then chances are you're going to end up losing a lot. Always use caution with this type of trading because the risks are very high even if you are an experienced day trader. Use stops and always use risk control in relation to the size of your trades and the size of your trading account. If you stay disciplined in a proven method and respect risk, then you should come out ahead in the end versus "trading by your pant" like amateur day traders often do.
