I have traded my own account for many years, trying most styles before finding my particular niche – day trading grain futures contracts. What seemed important in those early days now seems largely irrelevant. Instead, I focus exclusively on a few powerful trading concepts. This article summarizes what is important to me now.
In order to be successful at day trading support and resistance, you must have confidence in your trading strategy. Most traders with less than 2 or 3 years of experience, and for those who are just starting to learn day trading…well, they have nothing to be confident about. (But, there is a strategy that really helps inexperienced traders, so don’t be discouraged, we’ll talk about it in a minute.) If your trading strategy isn’t making you money consistently, in “real time”, you can’t have confidence in it. But, how can you tell if your method is any good when you don’t yet have the nerve and discipline to trade it?
Another reason I prefer day trading is that I can work through losing spells more quickly. All trading methods encounter drawdowns when traders have a losing spell. If a typical drawdown for your system spans a period of 10 trades, and the average duration of each trade is 2 weeks, you face drawdown periods averaging twenty weeks. But if you are a day trader completing one trade each day, your average drawdown period is just 10 trading days. If you complete more than one trade per day, the drawdown period is even shorter. It is never pleasant being in drawdown and it is easier to stick to your system if drawdowns are short. Twenty weeks, or more, in a loss situation tests the resolve of any trader.
Day trading is a broad term, encompassing many trading styles. The one thing all day traders have in common is that they are out of their positions at the end of the primary trading session. No open positions are held overnight, at weekends, or even during lightly traded electronic sessions outside primary trading hours. The typical image of a day trader is of a person glued to a screen during long market hours, possibly entering several trades during the course of a day. That is true of many traders, but there are other styes. For example, my own approach is quite different.
As told earlier, there are a variety of products available for day trading. The most popular ones are the stock and the forex currencies. Others include options like stock options and futures options, and futures like currency futures, stock futures, stock index futures and commodity futures.
Any strategy that loses more than 60 % of the time (such as a trend-following system) will take enormous courage to trade, no matter what you do. These strategies demand a certain type of person (rich, with ice water in their veins). Thousands of strategies force you to place a fixed stop and wait to see if it gets hit. These are difficult to trade with confidence – even IF you can find one that wins more than 65 – 70% of the time and makes money in the process. That’s a big IF. You can spend a career and thousands of dollars searching for success with this kind of strategy, most unfortunately end in failure.
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