DAY TRADING SECRETS AND WHAT TO LOOK FOR WHEN DAY TRADING

  • August 1, 2019

Watch our video on day trading secrets and our morning routine.

If you take anything away at all from this post it is this, you are only as good as the stocks that you trade. If you trade crappy stocks, you will have crappy returns and you’ll be a crappy trader.

There, I said it. It’s like shooting darts blindfolded; you’ll miss your target. Every. Singe. Time. So I’m going to let you in on a few day trading secrets that have helped me go from crappy to consistently great.

DAY TRADING SECRETS

Is there really day trading secrets that can revolutionize the way you trade? Probably not. Trading is hard work and emotional. 

Many people want to find a trading service that tells them when to get in and out of trades. Trade alerts are great if you know why you're taking the trade.

However,  we do have some good steps for you to follow as you day trade. In fact, you can join us every day in our day trade room and watch us talk what's moving real time.

We even have our day trade watch list that we put out every day. Unless, of course, the market is so bad, there aren't any good setups. 

Its important not to force trades when the market is in indecision mode. Day trading secrets won't help you in an indecisive market.

Make sure to take our day trading course before trying to implement anything regarding day trading secrets. 

Day Trading Secrets

1. FIND THE RIGHT STOCKS TO TRADE

You can have the best trading strategies in the world but if your stocks don’t move or have low volume, you’re not going to be making money consistently.

Or, you could be just starting out and completely overwhelmed at the thousands of stocks available to trade. I get it; I was there. 

So your job as a trader is to be able to identify the stocks that are going to move; I call these Stocks in Play.

Characteristics of Stocks In Play

  • High Relative Volume - (also keep an eye on vwap)
  • Trading Independently of What Their Sector and the Overall Market is Doing
  • Some News or Fundamental Catalyst Just Released
  • Unusual Pre-Market Trading Activity

HIGH RELATIVE VOLUME

You don’t want to just look for a high total volume. Instead, you need to look for stocks that are trading irregularly higher than their normal.

In simple terms, they have very high unusual trading volume. Stocks that trade millions of shares each day might not meet these criteria if that’s their normal.

Take Apple (AAPL) for example. If it traded 5 million shares today, does this mean you should trade it? No.

This is because 5 million might be APPL’s daily average. So, don't trade it unless it has an unusually high relative volume.

Otherwise, the trading might be due to institutional traders and/or high-frequency trading computers. Check out our real time stock alerts where we alerts you when stocks like AAPL have potential moves. 

Day Trading Secrets

You can see here on DRRX that it didn't have much volume. However, once volume came in, it did have a move up. This is a stock you'd day trade instead of swing because it's volume is hit or miss.

TRADING INDEPENDENTLY OF SECTOR AND MARKET 

One of the most important characteristics of stocks in play is that they’re trading independently of their sector and the overall market.

Every day, there's only a handful of stocks being traded like these, and day traders should trade only those stocks.

NEWS OR FUNDAMENTAL CATALYST JUST RELEASED

The reality is, as a day trader you want to capitalize on swift moves in price. And nothing moves a price more swiftly than hot news or, in technical jargon, a fundamental catalyst.

In my mind some examples of fundamental catalysts that will move a stocks price are as follows:

  • Earnings Reports - either missing or superseding earnings expectations
  • Mergers and/or Acquisitions
  • FDA News - i.e. approval of a drug to treat a disease
  • Stock Splits/Buybacks/Debt Offerings
  • News Major Contract Win/Loss
  • Legal Action
  • Restructuring/Layoffs

2. DAY TRADING SECRETS OF RISK MANAGEMENT 

Stop worrying only about how you'll enter a trade. The key is to know at all times when you'll exit.

Because the most important thing is to limit portfolio risk. The trades will take care of themselves.

Risk management has many names. You'll find it called money management, bet sizing, or even position sizing.

You want to live to trade another day. The rules are simple, don’t risk more than 2% of your account size. Take your account (whatever size it is) and multiply by 2 percent.

For example, a $100,000 account would risk 2 percent or $2,000 per trade. It's always better to bet a small amount initially on any trade in case you are wrong.

Which can easily be greater than 50% of the time. However, you can reduce your risk -and subsequent return, by reducing the percent, for example, to 1.5%, etc.

Because, at the end of the day, it's better to risk taking many small losses than to risk missing one large profit. Take our basic trading course.

3. DAY TRADING SECRETS OF MINDING YOUR BUSINESS

You don’t get any profit from watching the news. However, you get profit from buying and selling, not from predicting what'll happen tomorrow.

News from CNBC, Bloomberg, Stocktwits, and the list goes on and on will only serve to distract and overwhelm you. Stop watching TV!

Stop looking at financial news. Don't go lurking in a chat room waiting for the moderator to call out a trade.

What would be best is to study, find a strategy that works and start keeping track of what the technical indicators are telling you. Are they telling you it’s the right time to enter a trade?

Or perhaps they’re telling you it’s time to exit. Follow your rules exactly (read about the different types of stocks).

4. DAY TRADING SECRETS ARE PRACTICE AND PRACTICE SOME MORE

“Give me a dozen healthy infants and my own specific world to bring them up in, and I’ll guarantee to take anyone at random and train him to become any type of specialist I might select - doctor, lawyer, artist, merchant, chef and yes, even beggar and thief, regardless of his talents, penchants, tendencies, abilities, vocations, and race of his ancestors.” John B. Watson, early twentieth-century American psychologist

Practice. Sure, it might sound cliche, but it's the reality. To put it in perspective, many people see winners like Tiger Woods and make innumerable excuses about why he's great and they're not.

“He started learning golf as a toddler.” “He is a natural athlete.” “He earned his titles during a time when golf was lacking top-notch competition.”

THE IMPORTANCE OF GRIT

Do you want to know the truth? Woods is great because he has the discipline of practice ingrained in him. To demonstrate, look at the tape of him on Johnny Carson when he was three years old.

Practice, practice, practice all the time. What's more, Woods is famous for saying, “No matter how good you get you can always get better and that’s the exciting part.” In my honest opinion, that mentality is mission critical for both golf and trading. 

In fact, medicine is yet another field where skills develop because of repetitive training. Research shows time and time again, that medical students are often clumsy in the beginning.

Even their first tries at performing such basic procedures as finding a vein to tap for blood work is challenging. But through consistent, focused and repetitive work, they become competent doctors with long and successful careers. 

At the end of the day, trading is not going to be glamorous nor will the practicing be either. It’s boring, lonely and frustrating.

But the rewards are worth it if you put in the time. And time spent in a trading simulator is time well spent. 

5. DAY TRADING SECRETS OF KILLING YOUR EMOTIONS

Don't let emotions fluctuate with the ups and downs of your capital. Personal feelings can’t interfere.

If you see the opportunity because it meets all your criteria, you trade it. You have to take the same steps regardless and you don’t break your rules.

Know each day what your plan is. Then plan your trade and trade your plan. And sadly, traders both new and seasoned sometimes break their rules.

Instead of trading as they should today, based on their money now and their rules, they trade based on the money they once had. They are clearly trying to recoup.

How much money you use to have doesn’t matter. It’s how much money you have now. 

So if you started with $100,000 but now have $90,000, you would have to make trading decisions based on what you have now. 

So, with a 2 percent risk allocation, it’s 2 percent of $90,000, not 2 percent of $100,000. Follow your rules religiously to protect your money.

6. DAY TRADING SECRETS AND DON'T PLAY FORTUNE TELLER

Don’t try to predict how long a trend either up or down will last. It’s not possible.

If you build a system that gives you an entry and exit, tells you how much to bet along the way and adjusts to your current capital and current market volatility, you know when to get in and out.

In other words, you have a strategy to trade, know how it works and follow through on it. Don't stay in a trade just because you feel like the price is going to rise. 

CONCLUSION

At the end of the day, day trading doesn't have to be complicated. But that doesn't mean the road to success is easy.

What is needed is persistence, patience, and consistency with the commitment to learn and improve each day. In other words, grit.

And once you commit to getting started, momentum carries you. Producing results builds positive momentum you’ll get ahead and make progress much faster. 

Bullish Bears is here to help pave the road to success for you. We don't believe in shouting out trades in our trade room; we believe in supporting you in your journey.

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