Lately we’ve had more day trades highlighted here than anything else, so I wanted to take an opportunity to share some thoughts on that.
The recent market conditions simply haven’t allowed for doing much swing trading. We’ve seen limited follow through, and with the exception of 2 downward moves, the action has resembled what we saw late last year with slow grinds higher and low volatility. That’s not ideal for swing trading, although we have still had some listed here lately. As a result, I’ve frequently been focused on the shorter timeframes (day trading) by using setups which look good for a quick pop but not much else.
Why I Highlight Day Trades in the Bandit Broadcast
Those day trades are what I’m eyeing for my own trading, and therefore what I’ve been highlighting in the nightly Bandit Broadcast for all of you. Many days I can grab a few nice trades and make a day’s pay while waiting for opportunities to put capital to work for slightly longer timeframes with the swing trades. Other days I may take a few small hits, but overall it has proven to be a good income strategy for me.
While the market conditions will change (hopefully soon), the way I personally manage my day trades will generally not change. That isn’t to say that I won’t adapt, but rather my day trades will still fall under the umbrella of some broad guidelines that I want to share with you here.
I’ve been clear that TheStockBandit.com isn’t intended to be purely a ‘day trading’ site, so the purpose of the site is not to exclusively discuss or highlight day trading opportunities. Additionally, the format of the site has intentionally not been structured for the focus of day trading or day trading education (no chat room for example). However, day trades are still provided here when that’s the best thing available, and entries are offered with them so that you can at least see what I’m looking to trade and where I’m looking to enter. They are intended to be for traders who have some experience day trading, and do not need assistance in getting out. That’s for time efficiency on my end, honestly because I want my focus on the market during the day and not on a chat room (just to give you some background).
But with all that said, I am happy to shed some additional light on my day trading so that you can benefit from it. I don’t see a daily ‘day trade review’ feature being added here, but I can address trades when asked and I’m glad to do that. I have a number of people who email me intraday asking these exact kinds of questions, so you can also feel free to do that.
Previous Resources
When it comes to general trading guidelines for day trades, here are a few links you’ll find useful. There are some articles and some videos, but they offer insights into how I go about managing my day trades and the rationale behind some of them.
https://www.thestockbandit.tv/2009/05/tsbtv70-day-trade-management/
https://www.thestockbandit.tv/2009/01/tsbtv7-gauging-intraday-momentum/
https://www.thestockbandit.net/2009/09/03/stack-the-odds-for-daytrading-success/
https://www.thestockbandit.net/2009/11/09/managing-day-trades-effectively/
Here are a few additional guidelines for my day trading I think you’ll find helpful:
* I enter at the prices specified in the video from the night before. I’m going off the daily charts for entries, and going off the intraday charts for exits. Is the stock trending? Is it creating higher highs/lows or lower highs/lows? Is key resistance or support being established, or is the stock approaching those kinds of levels? If it is, I’ll need to take that into account for the sake of risk management and look to ring the register. I’m watching for intraday patterns to emerge as well (exhaustion, rounded tops/lows, support/resistance, continuation setups where I might even add if I feel aggressive, etc.).
* I don’t want to chase a stock beyond that level, so if it gaps through my intended trigger, I’ll avoid the trade entirely since my risk/reward profile for the trade will have changed. There simply are too many stocks on the move to get married to one and chase it beyond a prudent entry.
* My stop loss from entry is most of the time going to be 1% (as outlined on the day trading strategy page). That limits my losses significantly, and allows for a risk/reward in most cases of about 3:1. Most stocks will make a good move intraday (when they run) of about 3-5%, so a 1% stop offsets that nicely and gives me ample reward for minimal risk. A more lively stock that might move 5-10% on a given day will get a wider stop (like 2%), but often those are either highly volatile stocks or the single-digit stocks, both of which are listed here rarely. So in most cases 1% is enough for me.
* I’ll aim to book profits based on both the intraday price action and the profits I’m looking at. If the stock is clearly losing momentum, I’ll take at least 1/2 my shares off. If the stock has approached a key level, I’ll exit. If it’s climbing at a sustainable rate with plenty of blue sky above, I’ll look to sit tight and just adjust my stop to an appropriate level.
* My stop does get adjusted during the trade. If I’m up 1% in the trade, I’ll usually tighten my stop to breakeven. And as the trade climbs more, I’ll make incremental exits (for example, often when I’m up 2% I’ll take off 1/2). Essentially I want to keep a tight initial stop, monitor the intraday chart (anything like a 2-minute, 3-minute, or 5-minute chart will suffice), and see how long I think I can ride the trade. I’ll use excessive strength to my advantage and offer out some shares, and I’ll tighten my stop with the arrival of consolidation phases.
So while I might not be able to post every entry/exit each day, or review the day’s trades since the Bandit Broadcast is a forward-looking newsletter geared toward tomorrow’s price action, I still am willing to discuss day trades and hope you’ll feel free to ask for help anytime you have questions.
I will not always be right. I will have losing trades and losing days, but I’m always happy to help out. And feel free to share your comments with me here on this, I’d love to hear it!
