feel free to point me towards a redundant thread or move this somewhere else - thanks.
I know the focus here is on intraday but ....
I've been trading full-time for about seven years and part time for far longer. Have mainly focused on intra-day the last few years, mainly to 'avoid risk' -- ha -- and have used mostly the stock index futures, but also ETF's when I want to do smaller position sizing. My main focus is 'buying the dips' at apparently selective spots, scaling in to weakness slowly -- if necessary -- but only up to a conservative limit of my total capital. Obviously willing to hold over night. Flipping into strength, 'somewhere'. My main risk concern is a terrorist event that closes the markets and then makes it unlikely there will be any buyers when they reopen ... highly unlikely, I hope and probably counterproductive to my trading to even consider this but I do.
The advantages of day trading a stock index are obvious - lower company specific risk, more comfort in scaling in to weakness, no overnight risk, multiple profit ops during the day (if you are very good). But ....
I want to make more money and I want to spend less screen time. Ironically (or not), I believe the two can go hand in hand and so I am working on methods to do that but I believe that they all require trading individual stocks and a willingness to hold them overnight, sometimes.
Here's a strategy I'm working on that seems promising but it is discretionary and I have no way to backtest it - instead, I am observing it day to day, during the market hours. I now have a one day sample size, as of 8AM PST of the market day. :) Obviously, it is influenced by the overall market tone, which I have a lot of experience with. Today, it/they has been up anywhere from -5% (after heavy EURO based selling just now) to +20% (think/hope I would have started liquidating then, earlier in the day when you have a better chance for a positive overall market tone and this basket was up overall about 20% :)
Here's how it goes: using a stock scanner -- I use TC2000 V11 -- in the last half hour of the regular market, id a group of stocks that have been ramping up. Here's where the heavy discretion comes in - running through the daily charts, pick 'a bunch' of stocks from the upper % gainer tier and start buying them near the market close, assuming we are not melting down, overall. Some fundamental research is necessary - look for good stories.
Criteria for NOT selecting:
- dead cat bounce off of heavy selling
- volume 'too low'
- 'too far' (tough one) extended on the upside
- up on buyout news
- up on flimsy 'news'
- add others
Being risk averse, I think the criteria for not selecting is most important.
The next day .... start selling them into -- hopefully -- strength, probably usually near the open or pre-market. Maybe try and hang on to some runners.
Still testing but I would use an IRA for this to avoid tax and accounting issues.
Other rules:
- take small and equal positions on each stock to manage risk
- do not have the overall total allocation be too large, relative to your portfolio size. I get very nervous if I am ever anything approaching 50% of total capital long, overnight.
- don't select too many stocks from the same industry
Possible rules:
- avoid stocks under a certain price (could miss big movers though)
- use 5% stops