A trader I know on the Ace Talking Stocks Forum recently asked me about my experiences with day trading. Most of my experience with that type of trading is by necessity…as in
realizing I made a bad trade almost from the moment I entered, and sold
it right back minutes later! Or, on some rare occasions, I bought
something that took off significantly higher right away. But, most of my
day-trading has been accidental over the years, and not by design. Personally, I am not a big believer in day trading as a way to build wealth. By necessity, day trading forces a trader to sell way too soon to realize monster profits.
Sure, a trader can make BIG bets and if highly skilled, they might believe they have the chance to make outsized gains, but in my book, it only takes one or two bad trades to wipe out a good chunk of gains…or capital!
I did at one time have somewhat of a system of day-trading with a
10-minute chart…on that chart, I used two moving average lines to help
me determine direction and trend…
The two lines I most often
used were the 12 ema and 190 ma lines. The 12 ema is equal to 2 hours of
trading time….the 190 is equal to about 5 full days of trading time.
The idea was that the 12 ema represented the short, fast money crowd,
but the 190 line was more of the anchor on the chart. The 190 line tends
to run very stable and acts as the anchor while the 12 line gyrates
above and below the line.
Another important consideration for me
on the intra-day charts was to watch TRIX and pSAR together. On a
10-minute or 15-minute chart, I discovered that TRIX and pSAR tended to
trigger together fairly close to each other….TRIX tended to do crosses
first, and then the pSAR would flip to CONFIRM the trend change. I
would often make my move on the confirmation signal, and then I would
watch the 12 ema line to be sure it was either in the low point relative
to the 190 for long bets, or in the highest position above the 190
which often foretold of pullbacks. MACD could be substituted for TRIX,
but I often found MACD gave false signals on intra-day charts, and so
TRIX seemed more stable and gave fewer headfakes.
Wish I could
show you some chart examples, but StockCharts never lets my intra-day
charts last very long for the public to see. Is day trading fun? Sure, it can be. Is day trading something that can create an extreme sense of excitement. Why, you betcha! But if one is looking to amass wealth on a large scale, then I say day trading ain’t gonna get you there anytime soon.
I have yet to meet a trader who amassed a fortune over time by day trading.