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Anatomy of a Day Trade

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@azircon
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Anatomy of a Day Trade

I do not day trade regularly, but lately I am showing some of the basic tricks to a 'student' of mine, so there you go. The student is bright but stubborn, perhaps just like me. So conventional methods of teaching does not work with this dude. For everything I must give a demo! Just like in the movie 3-Idiots Aamir Khan used to say हर चीज का डेमो देना पड़ता है (that is Hindi, but the way, for those of you who do not know!)

/es[M22] - 5 Min/es[M22] - 1 Min

So, I was simply trying to explain a series of slightly different of morning trades for me. It means, the way I make a simple short-term day trade at the morning to catch the volatility of the market. US stock markets open at 08:30 CST (my time). It is widely known that first 30-min to 1-hr is typically the most volatile phase of the market. Volume typically stays high as well. It is typically easy to close a position within the first hour. There are many individual day traders, and even prop-shops (proprietary trading houses) only trade during the first hours mostly. They may trade later, but usually does by less volume.

Anyways, general market is trading on a downtrend since January 2022, shown by the large arrows on the daily chart of S&P 500 index. Market is firmly below 50 EMA, and making lower highs and lower lows. During this time, I like to short the rallies at all scales, because it is easier to trade towards the general direction of the market.

So, every moring, typically these days, I look for shorting opportunties. This also works as a hedge against my overall portfolio of stocks. I mostly trade S&P 500 futures, which is currently /es[M22]. I saw in the 5-min chart that overnight it traded mostly above VWAP. Volumes were low, as usual, and made a high around 4140, and since then drifting downwards, and went through VWAP to the downside. At the open, it rallied out of gate, since I am looking to short, I can't short into a hole (never short into a hole, wait for the bounce, there is always a bounce and short on the bounce!). Yes, I know it takes courage to short on the bounce, but if you don't have courage and don't know what you are doing, no need to day trade.

Since I was planning a very short term trade, I opened the 1-min chart (which I generally don't recommend people to use, I don't use it often myself, as it is too volatile). Anyways market rallied into the daily pivot, but can't get above it. This is a sign of weakness. As the pivot was rejected at 9am bar, I went short with the normal 6 point stop and 10 point target, for these type of trades. Stochastic is overbought as well, its an ideal entry. Trade started moving in my favor, and life gets easy at this point. Typical target is low of the day, 4085, but I thought first that I like to keep it just above the low. Then I chaged my mind, and thought that I should let it run a bit, and moved target even lower if the lows break. However, the market begins to stage a bit of bounce off the S-1 pivot, so decided to close the trade at 9:13 am bar manually. Notice, that I changed my mind 3 times within 13 min, yes, time slows when you are in a day trade :)

Take the money and run is my general strategy in day trade! Happy Trading!

Disclaimer: This is NOT professional advice, this is all just my own opinion and experience. I am NOT a Certified Financial Adviser. Consult professionals for any financial, accounting or legal related questions you have.

Charts are created in Tradingview.com, which is a free service.