Friday, 7 February 2014

My simple Day Trading Strategy - Trade Log for FAS on 060214(yesterday)

Stock specially financials make huge moves primarily on two scenarios :

1. In anticipation of an upcoming event - could be an announcement from Fed, jobs report, employment data, policy changes, presidents address
2. In reaction to a particular event - again could be as varied and almost similar to the group above

Usually in anticipation the stocks and ETF's will move up, unless there is a negative precursor to the anticipated event

Usually in reaction stocks will go down, as many have either already made their profits and sell out, or they are scared by the negative news.

Once you are able to determine whether the above scenarios and the markets move is a certain direction, you can determine the prices at which you want to BUY and Sell.

I am posting my Trade Log from yesterday below to describe how this can be accomplished :

I brought 200 shares of FAS at 77.82 and sold at 79.90 , profit of about 2 dollars per share. This can multiply to larger value if you decide to invest more.

You could also make multiple trades and still make profit on a day like this, however you would need to ensure that your transaction costs are met.

In the beginning of the day, it is almost impossible to enter the market, as the volume is very high, but as soon as there is a first dip, you can make your move. In the trade above, the first dip happened at around 9:45 am, which was a good time to enter due to the following reasons:
the anticipation of jobs data based on the anticipation theory explained above
Volume was high near about the 80 mark
Both the slow stochastic and fast stochastic showed a dip signal (should ideally be between 10 to 25 for the right buy, and then bounce back above 25) Note the Stochastic signal a buy twice once at around 9:45 and next at around 9:56 , so there will be at least two opportunities for you to make your move
MACD is largely positive
Also if you notice the candlesticks, green sticks (the longs are quite strong) compared to the red ones(shorts), indicating that the market is moving in a positive direction

Important Note: I do not day trade on days that the market is on a negative direction. This is a rule I believe one must follow always!