Thursday, May 5, 2011

Day trading

I am able to understand a lot about day trading and the volatility we see in stocks during the day. Most of it is because of professional day traders who buy on a rising stocks in the morning and afternoon and cover during the day closes.

There are ups and downs to doing day trading. But one has to day trade only on volatile stocks in the range of 2-20 percent. One can gain 3-4 percent on a daily basis.

Suppose a stock goes up 10 percent after opening it can go up to 20 percent or go down to 5 percent.
It is important to use limits during day trade.

Suppose a stock goes up then has a pull back of 2-3 percent. that is the time to purchase. But if the pull back is more 2-3 percent after you buy, than you got to sell it. Usually on rising stock, after the pull back of 2-3 percent, the stock moves to it 2-5 percent if more buying ensues.

Same thing during shorting too, when stock moves up or down with high volume there is high volatility. These are the stocks to get into for day trading. These kind of stocks you can make 2-5 percent on a single day trade. The most important thing is to understand the upside or down side trend of the stock. Ofcourse, the extreme cases, are the best to deal with.

1. If a stock when up 25-45 percent above 30 day moving average. One should see evidence of moving down and should not guess the day before for day trading. If you see a high volume of up or down, then you get into the trade and take a profit of 3 percent and get out every day.

It is possible and interesting strategy. today PPO went from 10 percent in the opening to 21 percent. But it may come down to 15 percent when closing because the day traders will cover positions and take profits.
All this volatility is because of them. Very interesting point and observation about psychology of trading.

1 comment:

Trading Systems said...


Day trading is extremely risky and can result in substantial financial losses in a very short period of time. It refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close for the trading day. Thanks...