Can You Day Trade Successfully?

Sure you can!

Why then do most day traders end up broke?

I think it is because they try to apply a long term strategy to a short term time frame. Once they get on the right side of the trade, they have the illusion that they are going to ride that trade for 60, 80, or 100 pips. Most of the time they get a price reversal, stopped out or scared into a losing trade. There are a few exceptions when you can ride price like that, but normally you can not, so let's deal with the everyday market.

If you are going to be a long term successful day trader; it is imperative that you understand that you are not going to ride a 5min set-up into everlasting pip glory. On a short term trade set-up like your 5 chart, look to get in after a confirmation in the direction of the trend, then get out quickly.

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After a confirmation, you can usually get out with about 5-10 pips, before price begins to retrace(in the candles) on you or it begins to trade sideways. I think your 15 min chart is a better chart to trade from as a short term trader. Be sure to trade in harmony with the trend.

In the morning, draw a short term trendline on your chart. Be sure to also check to see what the trend is on your daily chart. I generally check my hourly, 4 hour and daily, just to see. If I have an evening star pattern on my hourly chart, then I am not going to take a trade to the long side on my 5 min chart. You have a much stronger chance of quick profit if all or most of your charts agree. You will have the opportunity to go short or long on your 5min chart, but your most successful and profitable trades are going to come when you trade in harmony with your trend.

Keep in mind that your trend is likely to CHANGE or take a BIG DIP or a HUGE SPIKE, so watch your candles for that.

I know traders who get 200 or more pips many days. I can tell you I don't even close to net those kind of pips on an average day. I usually set my TP level for 5-7pips on my 5 min chart and 10-12 on my 15 min chart. I use my small trades to build up my accounts, and I use my larger trade set-ups for my profit rides. My smaller trades during the day give me that extra SL money I need to facilitate my longer term trading, so if I am stopped out, then it doesn't hurt nearly as bad.

(K.I.S.S), Keep it simple sexy. Trading is not physics, it is just a bit tricky until you get use to the way price moves.

I am an equal opportunist and trade all time frames, and I can tell you from experience that a valid set-up on a larger time frame is going to give you more accurate and profitable rides. The downside to longer term trading is that you have to wait longer for those trade set-ups. The downside to day trading is that your profit run isn't as long and the trend within a trend can get confusing, and you must be very good at getting in and getting out quickly. The benefit of course is that you get more trading opportunities and you don't wait as long for valid set-ups.

Short term trades - GET IN, GET OUT!!!!!!
Longer term trades - sit back and enjoy the ride!

Learn your candlestick patterns and always let price be your first indicator. Only take trades with proper confirmations.



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Commodities & Stocks Ready to Bounce or Rally?

Commodities and stocks almost look ready for a rally or at least a relief bounce. The market is down over 5% and the normal pullback this year has been 4%. Using technical analysis and inter-market analysis we can see that the market is reaching extreme lows and this usually means we are only a couple days away from a rally.

I work with several market technicians as we all analyze the market a different way and share our work with each other to gain maximum insight on the broad market moves. We analyze momentum cycles, magnetic cycles, volatility levels, support & resistance levels, volume analysis and inter-market analysis.

Each of us has found a formula which works for our individual style of trading. And by combining our work we have found that we can collectively produce some very exciting trading signals for the broad market. We focus on leveraged index funds in order to take advantage of our insights. While nothing in trading is ever perfect, the analysis for timing the broad market is very exciting.

Here are some quick charts on where the market is trading.

US Dollar – Daily Dollar Price Chart
This chart is a no brainer. The trend is down and trading at resistance. If the US dollar reverses back down we will see stocks and commodities move higher.


VIX – Daily Volatility Index
Again, overall the trend is down and trading at resistance. As the saying goes “When the VIX is high its time to buy”. Just to be clear, the VIX is low compared to the previous highs set back in 2008 which was around the 80 level. But, if we want to keep things simple for the current trend then the VIX is high for our current market condition. The VIX moves in the opposite direction of the equities market.


DIA – Dow Jones Industrial Average ETF Fund
Here is the Dow Jones index fund and it clearly shows that when investors are selling out of their positions and getting scared of a market collapse, volume rockets higher. When we see the price pullback to possible support levels and volume increases that is a time when we should be looking to scale into a long position for a bounce, such as now.


XLE – Energy Sector ETF
You can see that the energy sector is very close to a support level and volume is high. With the US dollar about to reverse back down it will help boost this sector as it is tied in with commodity prices which rise with a falling dollar. I expect we will see a price gap lower and fill this area before moving higher.


GLD – Gold ETF Fund & Silver
This chart has not changed much from last weeks report. We are getting the drop as expected this week. We could see the gap fill from early October before gold stabilizes.

Silver is in the same situation. Gold and silver move in tandem so we are waiting for a bottom before looking for a low risk entry point.


Commodity & Stocks Trading Conclusion:
To keep things short and to the point, I am seeing momentum cycle lows as of today, magnetic wave lows today, and most commodities and indexes trading at support. These observations, coupled with the US dollar at a possible resistance level and market volatility spiking to an extreme high, lead me think a bounce is in the cards.

The market has had an amazing rally so far this year and I feel that we will have a solid year end rally going into Christmas. That being said, the recent sharp correction could form an ABC retrace pattern which means we get a bounce in the next week or so, then one more multi day sell off which will scare even more bulls out of the market. I am going to be scaling out of this oversold play quickly to lock in some gains while allowing a smaller position to ride for larger gains.

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