Stock Market Day Trading Experiences

The markets, prior to this past week of March 9, 2009, being stagnant or drifting down, made me think about even shorter-term trading as in day-trading. The motivation was that I wanted to see profits sooner rather than later (i.e. tired of waiting). I went back to my strategy to nickel-and-dime the market, literally as you will see.

With the market trend showing upward movement since the beginning of the week, I knew I could rely on that underlying up-trend for my day-trading actions. I trade between 1000 and 1500 shares for my day-trading activities involving both long and short positions. My commission fee is $7 per trade. Therefore, it costs $14 to open and close a position. With stocks in the range $10 to $20, a $0.05 to $0.10 price change is very easy to catch as long as you are on the correct side of the trend (i.e. the price movement). And the other nicety is that such catches can happen many times during the trading day.

With a 1500-share trade, a $0.01 price change covers the commission yielding a $1 net profit. A $0.10 price change nets $136. The most accommodating trades happen in a very short period of time. As I see the trend patterns develop in real-time on the charts along with my technical indicators, I can buy at a dip and within minutes Ive hit my $0.10 target where I close the position to pocket my $136 net profit. Then I look for the next day-trading opportunity to repeat.

As it turns out, there are times when I leave money on the table by closing too early but that is the trade-off (no pun intended) between taking a guaranteed profit versus being greedy and waiting for more only to have the stock retreat thus eliminating the profit opportunity altogether. In the worst case, the price reversal can take my position to a loss situation. Assess your own level of risk-reward along with the magnitude of price movement for the stock that you are trading.

In the event that a trade turns against you, the best thing to do is to take the loss rather than to suffer more monetary or time loss. In a few cases, my entry point was not at a trend reversal so my position turned into a loss situation. Rather than closing the position, I held only to see the stock price continue to drop. Finally, it settles at the days low point and sits there for a long time. And now faced with a big loss which I refuse to accept, I lose to time as hours go by without stock price recovery. My capital is tied up without participation in another trade.

Day-trading using 1-minute periods on a candlestick chart is similar to inter-day trading where the day represents the period (i.e. minute candles versus daily candles). The big difference is that day-trading happens a whole lot faster. The same methods and discipline apply to either case.

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