Day Trading Advice: Looking For The Catalyst
Check out this video from Lightspeed Trading's Trader Talk Series. A real trader gives tips on where to go and what sources to use for information as well as what to look for when researching trades. Visit http://www.lightspeedtrading.com/tradertalk.aspx for more unfair advantages!
Step 1: Research Financial Information
I try to get into the office by seven or half-seven everyday. I go through the morning newspapers, I read Investors Business Daily, and I go through various websites providing me with financial news and information. Basically what I'm looking for is a catalyst. Something that's going to get a stock in play and bring the volume to it to reaffirm the move. It could be an earnings release. It could be FDA approval on a drug.
Step 2: High Probability Trades
The types of trades that I'm looking for are what I consider to be high probability trades. So let's say, for example, the market's in an uptrend and I'm looking for bullish type patterns. I'll identify some cup without handle patterns, I will identify cup without handle patterns, double bottoms or just some type of consolidations.
Step 3: Aggressive Trades
Let's say we're in a bullish market, a stock has created what looks like a cup with handle pattern. I'll be looking to purchase that stock when it starts to break above the handle. If I'm looking to be a little bit more aggressive I might look for a stock that's creating the handle and look for a break of the descending channel, creating that handle.
Step 4: Trading Software
With the help of the software that I have here I am able to identify volume spikes or stocks that are showing relative strength or relative weakness with relation to the stock market. And then I will look to enter my positions, enter a trade
Step 5: Assess The Conditions
At the end of a trading day, I will print out all the charts on the various stocks that I was looking at and trading during the course of the day. I'll review my things with some of the guys here and we'll talk about our entry points, our exit points, what we could have done better, where we may have left some money on the table, what we could have done to prevent losses we may have taken during the day.
Step 6: Charts and Analysis
Then what I do is I go through a lot of charts. I think that one of the most important things about being a trader is doing your homework. If you know beforehand where you're going to get into a trade and where you're going to get out of a trade that'll allow you to make the best and clearest decisions.
