I recently began day trading S&P e-minis to supplement my longer term trade system that uses daily/weekly charts. I am prepared to lose money in exchange for the experience of trading intraday. I also plan on trading for a living, therefore, active trading can provide better opportunities for cash flow in comparison to a longer term trend following system. Here are 10 things I have learned trading actively intraday in two weeks:

 

  1. Limit the amount of bad trades I make. This sounds so obvious but on smaller timeframes reaction speed has to be a lot quicker. I don’t have the privilege to take my time and contemplate what is in front of me. Day trading may try to force you to make really bad trades sometimes. Trades that you know aren’t that good yet you take them anyway. Those are the ones that will have the biggest impact on your P&L.

  2. Very similar to my last point, day trading makes you think you should always be going for the home run trade. The home run trade that rarely happens but the one you hope happens every time you enter a setup. Like most, I find it better to focus on using my edge to make small gains in the market. The only days I look for home runs are trend days where the market can open on lows and close on highs.

  3. More so than any other trading style, day trading makes you always want to play the reversal, trying to buy the lows or sell the highs. My worst trades have come when I try to fight a trend. I have limited my exposure to counter-trend trades in only the highest probability setups. My most successful trading has come from finding the established trend and buying pullbacks/breakouts in the direction of the trend. Not only is my probability of success higher because I am not fighting the trend, statistically speaking, buying pullbacks with trends has the highest win rate of any of the trades I take.

  4. Gaps provide great trading opportunities. A lot of work has been done on gaps and patterns that they provide. Through my research I have found that Monday has the lowest probability of a gap filling with the rest of the week having a significantly higher probability of filling, Thursday being the highest. I like getting my trading day started by playing the opening gap because some days it almost feels automatic. Furthermore, I get to start my day with a winning trade, which is a positive for my psychology for the rest of the trading day.

  5. If the market is moving too fast/choppy for my style I try to just sit out. Not every market has to be traded or can be actively traded by a human being for that matter. Trying to trade these days have been chewing on the gains from my profitable days.

  6. Stay off StockTwits. I used to love being on StockTwits during the day when I was not actively trading intraday. However, after the first couple sessions of day trading I quickly realized it is better to tune out all the noise. Better to focus on what I should be doing and my own trading style.

  7. I will only add to a position if the market already validated my thesis. If I see we may be in a trend day and the market starts to move up, I will add to my position with each successive pullback.

  8. I have found that my best trades are when the market quickly moves away from my entry and never comes back. That is what is so different about day trading opposed to trading the daily chart. I would maybe have to wait a couple of days to see if I entered a valid trade but on lower timeframes I can receive gratification in seconds.

  9. When I am in a position and my stop is in, depending on the trade, I try not to watch it tick for tick. Constantly sitting in front of the computer all day will make you want to do something while you should just be reacting to what is happening. For example on the choppy days I will play Xbox, learn basic blackjack strategy, go on YouTube, anything to distract me from overtrading.

  10.  I can’t emphasize this enough. My greatest asset in day trading has been my ability to sit and not do anything. If I only place 3-5 trades in a day I know I am trading well, the days where I try to make 20 trades is where I know I am doing something wrong. Most days I strive to make a couple nice trades, make my money and get out. I have already had a couple days where I am up big and then try to do too much and give it all away.
10 things I learned trading e-minis in 2 weeks