Tuesday, January 11, 2011

How to become intraday trader

In Thursday’s post I questioned if it is not maybe better to start with intraday trading. (Under intraday I mean trading with no overnight position as positions will be held only during the day.)

I am a swing trader and I was a swing trader for last 7-8 years and such transition will be a new challenge, but I’m looking forward to it. In other words, I’m becoming old and having position overnight, being glued to Bloomberg or Stockcharts is simply not for me.

How would I approach this transition?

Firstly, one must have systematic approach for entries and exits. Many intraday traders are using pivot points and that would be main trading strategy. To spice everything up I will add some moving averages - 10 and 20 exponential and 54 volume weighted moving average. Entry points will be at failed pivot points, short or long depending on market bias and exit will be on the test of significant moving averages or other pivot point. Main issue with trading intraday is to have tight stop loss and to be discipline enough not to question it.

Why pivot points as main trading strategy?

Again, I will refer to Thursday’s post in which daily range is outlined to be around 400 points. Over last 18 months average distance between pivot point and R1 was 51% or some 200 points per day. Distance between pivot and S1 over same time was 49%, so approximately 200 points again. This is logical, because if you deduct S1 from R1 you will get daily range.

So, what are the milestones in this process?

First one is to make 10% of average daily range over next 3 months.

Second is to make 12.5% of average daily range over next 3 months.

Third is to make 15% of average daily range over next 3 months.

And last is to make 20% of daily range over next 3 months.

That way at the end of 2011 I will be in position to make about 80 points on average per day, or about 19000 per year.

To make 20% of daily range maybe looks like a big target, but don’t forget that 20% of daily points is not even half of what the difference between pivot point and next major point (S1 or R1) is. And market is not going in straight line from low to high.

Will elaborate further on the topic in days to come.

Trade with trend!


Jan said...

Hi Igor,
thanks for the great blog. What time frame would you recommend to use for intraday? I have been trading 5, 10 and 15 minutes for the past 6 months, but am finding it difficult to choose the right one for myself. Each gives too early or too late signals for entry/exit, even used in conjuction with longer periods to gauge the trend (i.e. 30 mins, 1 hr and 2 hrs).

Alsi Trader said...

Hi Jan

I will use 5 minutes. Everything less and you are trading noise, and everything more you will go into swing trading.

Don't worry about too early and too late exits, that will happen. You just have to work harder to improve it.

Pieter said...

Hi everybody

I use 10 - 15 mins, I found that I get too many false signals on 5mins.I have been day trading for about 6 months.I use signals to enter and exit and with 5 min's you often exit a big winning trade too early.

Alsi Trader said...

Hi Pieter

Whatever suits you best,I'm glad that you are making poitns that way, stick to it.

For me intraday is not about catching big profits it is about plan that is in post. I'm new in this game and would like to progress slowly.

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