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My 9 Steps for Day Trading
Step 1. Wake up:
Step 2. Drink water and snag some food: (I usually eat an apple and peanut butter, or carrots).
Step 3. Turn the computer on: A $600.00 Toshiba lap top should have everything you need. 4GB of Ram 500gb Hard drive space. I personally use a MacBook Pro. I have two screens. I have two eyeballs. I have two hands. Not a coincidence.
Step 4. Open up you Broker: Think or swim, Interactive brokers, Tasty Works - whomever.
Step 5. Open up your Charting software: Most traders have a charting software that is separate from their broker. In my opinion, the broker with the best charting software hands down is Think or Swim. I know countless traders who trade through and chart using TOS. I personally use tradingview.com for my charting because it also has social media built in.
Step 6. Check for gaps: Depending on the time of day, if it's before market open, check pre market gaps. If it's after market open, check gap list.
Step 6A. If it's during market open, I sort through the gaps using volume and I go find the one with the best edge.
Step 7. Find a gap with the best edge: Edge is often defined <by me at least> as direction. Can you with 100% accuracy say, "this stock and trend is moving up or down?" If you can, trade in that direction. A great gap will help you determine direction. I prefer trading stocks with volume higher than 1,000,000 shares daily. If the gap is perfect, I'll take 500k of average volume. If the stock has less volume than that... eh
If a stock has traded or gapped more than 22% I am very cautious trading that stock as a day trade for that day. I will almost immediately think to myself "this now needs to be a swing, wait for a retest on the hourly 10 ema."
Step 8. Then analyze WHO IS LOSING MONEY and who is making money. The more people who are trapped, the better.
Ask the questions ARE PEOPLE LOSING MONEY? Would I be losing money, if I got into this stock yesterday? If the prior time frame candle is bearish and the stock gapped up, someone in the world is losing money. The more money lost, the better the edge. Same with bullish candles. If yesterday's candle was a nice bullish candle with a higher high and higher low and the stock gaps down hard the next day, clearing support and trapping people (aka ticker BKS on 9/9/15 and MW on 9/9/15) people are trapped. They are losing money. Look to trade in the direction of the gap.
Step 9. The time frames and the processes I view them:
Look at the daily candles.
Look at the 5 min chart
Look at the 15 min chart
Look at the hourly Chart
Look at the daily again...
Then if you love the set up, pick the time frame to trade from. If you're day trading, consider using the 5 & 15 minute candles.
THE MAJORITY (80%) of my day trades are placed with a bounce off of the 10 or 20 EMA on the 5 min and the 10 EMA on the 15 min.
The moving averages I use are the 10,20,50 EMA's on ALL time frames.
My most average day is taking 2 trades. I win on one and lose on the other. Usually I lose .7R or less and win .7R or more. VERY average. Expected. Normal. Yesterday I placed two trades. One on KHC bullish. I lost .25R. One on SKX bearish and I won 1.03R. 0 excitement ensued.
I hope this is helpful! Let me know if you have any questions or need anything at anytime!
Enjoy your next trade!
Jerremy Alexander Newsome