Guide yourself through trading with Day Trading Tips from Trading Tutor
This blog on Day Trading Tips will help to highlight simple ways in which to view the market to help improve your day trading results. Day trading on the financial market can be a complicated and cut throat business for those who are uninformed. Whether you are a beginner or seasoned professional, Day Trading can still pose great risks to your finances and sanity if you don’t keep your eye on the ball and remain in the zone, so some day trading tips will always come in handy.
Trading Tutor looks deep into the Trading Psychology of market participants and also gives you great information on Day Trading with success. In this piece we will give you some essential Day Trading Tips to help you on your way to building success through Day Trading. Trading Tutor offers fantastic FREE Trading Courses too, so take a look further on our website to find out more such as an in depth 2 Day Trading Course to turn you into that successful trader you want to be.
To successfully day trade, 3 components are essential:
1) The Method
Firstly in my Day Trading Tips I’m going to talk about the method.
Day Trading Tips – No 1:
How do we know which method to use?
In my Day Trading Tips I will address the fact that there are so many different Day Trading Courses teaching various methods such as Breakout trading, swing trading, momentum trading, volume trading… the list is almost endless!
Let us for a moment pretend that we are not dealing with trading a financial instrument, but instead, dealing with people. Now lets rephrase the question…
How do I know how to treat people?
The question now begins to sound ridiculous, because to give a useful answer, we need to ask 2 more questions;
Who exactly do you want to know how to behave towards?
The market is no different. Let’s not forget that it is people and their actions moving the price up and down or not at all. Therefore the calibre of investor needs to be known. Day traders or local traders will cause price to rotate back and forth creating a “sideways”, or “range bound” market. Institutions will cause larger market moves and often initiate trends.
So to answer the question we need to imagine that the market is one of a number of people that we could meet each day and so long as we know who we are meeting, then we can then decide how to behave.
Day trading tips will now breakdown those people into categories:
Range Day: Mr Range Day is calm and placid. He is very predictable and generous as long as you recognise him!
Trend Day: Miss Trend Day is the fast volatile type. She is unforgiving. If you don’t recognise her, she will take you for all you’ve got.
Trend Change: Mr Trend Change swings both ways, first one way, then the other. If you don’t recognise him, he will catch you unaware and take back all of your profit.
You get the idea?
As long as we know what we are dealing with as quickly as possible, we can apply the correct method of day trading to each and profit from the outcome.
In my courses, I teach delegates how to identify the day trading structure types and then the correct methodology to apply to each. As with all methods strict risk management is essential, along with a positive mental attitude. I hope you found part one of my day trading tips useful.
Day Trading Tips – No 2:
Previously in my day trading tips blog I spoke about employing a suitable method once you have identified the day type.
The next thing you need to know is “when”. How do you time the market for the lowest risk entry point when day trading? This is what we will cover in Day Trading Tips No. 2.
For this we need a selection of tools and the right knowledge on how to use them. All tools must be used in the right context of the day structure type:
- AB=CD Pattern
- Candlestick Patterns
- Trend Lines
- Market Profile Histogram
Most people will be familiar with trend lines and channels. The use of these is fairly obvious and depending on the time frame you are using to trade, they can be used in ranging markets and trending markets, where an entry is made as the price approaches the boundary line:
The above chart is during the London Trading hours in the GBP June Futures contract.
Fibonacci trading is also very well known, but is probably one of the most misunderstood of all the well known tools. Due to misunderstanding and incorrect use, there are many posts on forums from disillusioned traders labelling Fibonacci as nonsense. I use the tool daily and find it invaluable in predicting turning points in long term charts:
Note the turning points in crude oil at each Fibonacci level.
The AB=CD Pattern is very accurate in the GBP Futures, often predicting long term turning points within a few ticks. By scaling down to a small time frame we can easily nail a low risk entry for excellent profits:
The Market Profile is more specialised and takes a little time to master, but is well worth the time investment. It is my listening post as to who is getting involved and at which price. This is not mainstream charting, and is mostly used by floor traders. there are many formations and indications, giving early clues to the day type. The example below shows a trend day:
Note that the chart started with period “D”. “E” period extended the range up. “F” period failed trade as low as “D” period, leaving 2 single letters before breaking higher. The single letters were the early clue that the market was going to trend. Further note that each subsequent period failed to trade lower than the last one.
The above tools are some which I use to make my day trading decisions and while they may seem daunting at first, once learned, you will be equipped far better than 95% of market participants. All of the above are taught in my classes, along with volume interpretation to give my students the edge they deserve for taking the time and effort in investing in their own trading education.
In trading, you can be right, but if your timing is off, it is highly likely that you will be stopped out before the market moves where you thought it would.
Day Trading Tips – No 3:
Government Data Releases and News Events.
People who trade using economic news data are known as fundamental traders, whereby they are of the belief that price action is determined by the underlying fundamental data concerning the instrument being traded and, to a degree, this is true.
However, all too often I have seen a news release, which may be positive for the instrument concerned, yet price has dropped. Why does this happen?
A.Gary Shilling quoted in Forbes magazine in 1993: “The markets can remain irrational longer than you and I can remain solvent”.
So how do we deal with this?
By simply being aware of all scheduled releases concerning any instruments you are trading, and avoid placing trades in and around news releases.
Trading should take place a few minutes after the release, once it is clear how the market has digested and interpreted the news. A falling market following “good news” is a clear indication that prices are too high and there are no more buyers. Price must come down to attract more buying. Conversely, a rising market following “bad news” is a sign of strength and market participants are perceiving value at current prices.
Sometimes good news is bad news. Consider the loose monetary policy adopted by the US Fed of late. Their policy is to continue quantitive easing until such a time as the economy shows signs of growth and falling unemployment. The prolonged upwards trend of the US indices has been fuelled by this loose monetary policy, and therefore any “Good” economic report causes market jitters, based on the idea that if the economy is picking up, the Fed will tighten quantitve easing, thereby stemming the flow of cash into the stock markets.
I find that keeping one eye on the news and the other on the technical picture serves me well, preferring to trade with the big boys, not against them. If they say that a market is oversold, I am not going to disagree, whatever the fundamentals may suggest, and money flow will first be seen in the charts and the trade volume, not in the news.
A good website for keeping an eye on these releases is www.forexfactory.com, where you will find the timings, name and full explanation of the reports due out for the coming weeks.
Happy trading to all.