As a technical day trader I continue to work on solidifying my own day trading strategy. As I explore the markets for opportunity, I find that the urge to follow others “advice” becomes more distracting. That’s not to say that there is no such thing as stock market strategy advice or stock market trading advice or education, but that the right way is your way. Provided that it is working of course. Once you find out what your way of day trading is then everyone else’s should feel conceptually wrong to a certain extent, even if it too is successful.
I’ve touched upon this on other occasions, but it crossed my mind again to emphasize this important fact of day trading. I read a financial article article about a stock that I have been tracking. The article developed a strategy to short particular stocks based on the fact that “what goes up, must come down.” In its simplicity it is true and should be a part of the contrarians trading strategy. Yet, the article left room for a more detailed day trading concept to be desired and I think that is what a day trader needs to develop more than anything else; an awareness that what you’re looking for comes from within you.
Although the thoughts and ideas of many stock market articles or stock picks may develop intriguing opinions, ultimately what you are looking for in a day trading concept that will remain successful will come from your own understanding. This article I read used statistics, that weren’t backed up in any specific way to the call, but were also certainly more than believable. This is fine for the broad argument of stock strategy as price motion is often a case of perception, and a result of peoples belief of price movement.
This particular strategy proposed that a gain was more likely to occur after a pull back and that the opposite was also true, especially in the short term. And, that shorting stocks could be a very rewarding method to capitalize from the concept of “what goes up, must come down.” The article recommended to look for stocks trading below there 200 day moving average and that have traded higher for 5 or more days in a row. The other qualifiers are a combination of technical readings of RSI and Power Ratings that must conform to certain levels as well. After these steps have been fulfilled they suggest that you short, and that these technical indicators would result in the stock dropping over 1 or 2 days, or a weeks time frame.
They listed a few names one of which was LEAP. I have been writing about this stock and the irony is, yeah what goes up must come down…until it doesn’t. Obviously timing is the key. The strategy seemed a little ambiguous as all stocks will have price motion. Without it there would be no market and no profession in day trading. The larger questions remaining from this articles call is what peaked my interest and a number of follow up questions.
O.k. short, then what? When do I take off the short, when do I add to it? Is the parameters of this strategy that the stocks screened will continue to go lower? What is the time frame of the trade? Do stocks only continue to go down with this strategy? I thought the article was “what goes up, must come down”…so what is the other half of this strategy to tell me when to exit, and when will this stock go up and this strategy be unsuccessful?
All these are fair questions and outline my argument with articles of similar nature. After you read a financial news article or day trading stock strategy, ask yourself questions like these. Often these articles are opinions only, and leave the reader far from a trading or investing strategy that nears consistent profitability. Possibly, to the writer, there is more details to express, but he or she has often left the reader with a lack of information due to there being nothing but opinion behind judgement.
If you extracted the lacking information from study or re-questioning, you would find in itself to be the day traders own strategy (or basis of one). It is cyclical then, that your way will be missing in the majority of what you read. This is frustrating for the beginner day trader searching for their own market strategy, and a important pitfall to be aware of. Loss of this awareness in day trading can lead to costly mistakes.
Of course, I will leave you as others have and undoubtedly submit my day trading concepts to review. I would like to think that with equal time and consideration the concepts and strategies that you can develop within the structure of Elliott Wave analysis do not leave you with question. That they could be valid to your way of creating a day trading strategy. Once you understand how the Elliott Wave works, you will be forced by your own intuition and desire to realize your way, that there are rules to day trading and they can be your own.
As uncontrollable as price motion is, there is a way to harness it through your own set of rules. If you understand Elliott Wave trading, or you apply your own Elliot Wave day trading strategy to any of the financial stock market calls or concepts that you read, you will not be asking yourself, “then what?” You will know exactly where you are as time tells you, second by second or day by day, depending on your trading time frame. Regardless of your day trading strategies preferences the larger theory here to understand is, do not enter into an investment or day trade with someone else’s open ended strategy.
You should have a buy price, you should have a sell price, you should have a sell stop price and you should know these three things before entering a financial investment. These three price points alone, without any other words beside them, is much more solid a strategy than most articles you can read and read into.
Remember, as a retail investor, price is your only informative advantage. An investment financial article for some traders may provide nothing more than a satisfying realization that your way is being developed the right way.