If you’ve stumbled across my blog you probably, like me, aspire to make a living at day trading.
I’ll be frank and tell you that I’ve only been at this for a few months, with varying success.
Like many new day traders, I have a need to trade with more discipline, consistency and confidence. And more than anything, I have a bunch of questions.
On this blog, I analyze my own real winning day trades, as well as trades that I would have wanted to enter otherwise. But this is more to help me in my own understanding. I’m a big believer in writing thoughts down in order to overcome road blocks and achieving goals.
So, I can’t say that I’m qualified to teach you how to day trade. There are plenty of other great resources for that.
Rather, I want to investigate day trading with an empirical and data driven approach. Of course there probably are backtesting tools available that can analyze raw data. But they may be limited in answering the more nuanced questions that I have. Some majorly pressing ones include:
Which stocks are more reliable than others?
Many stocks repeatedly show up in the list of top gainers on my stock screener. But it would be nice to know which ones consistently produce profit for me and which ones consistently disappoint.
Do certain stocks tend to give a better reward-risk ratio than others?
Many times I’ve traded a stock and went for a 2 to 1 reward-risk ratio, only to get stopped out at my break even point when I could’ve come out ahead if I had went for a 1 to 1 reward-risk ratio.
When is the best time to trade?
Most day traders will say the first 1-2 hours, and I would probably agree. But I’d like to find out if there are certain pockets within this timeframe that provide better trading opportunities than others. Also, are there lucrative mid-day pockets?
Even more nuanced questions include:
Are certain stop loss and entry level zones, more profitable than others?
Often stocks will test certain dollar-cent levels, such as $0.50 and $1.00, before breaking out. So can I find a correlation that certain stop-entry zones, such as 99-51 or 49-01, tend to preclude more winning trades than others?
Which top ranked stocks tend to provide more profitable trades than others?
I trade stocks from the day’s top gainers on my stock screener. I’d like to know which ones, in terms of rank, tend to provide more profitable trades than others. Is it the #1 ranked stock? Is it the number #2 ranked stock? Did it maintain its spot before my buy signal appeared, or did it climb from a lower spot? Down to which rank level do I stop paying attention?
Do certain types of news produce more winning trades than others?
It is a commonly accepted assumption that positive news, such as FDA approvals, earnings beats, and received orders leads to profitable day trades. But which one of these is a more reliable catalyst? There have been quite a few times when I’ve traded a stock on positive news only to be disappointed.
Depending on your disposition, you may or may not find some of these questions odd.
But my background and day job are in IT, so finding correlation between events, both obvious and subtle, is a big part of my job.
At any rate, I hope you find the information on my blog interesting.