Choosing  A Day Trading System

Choosing a Day Trading System is sure not easy. As many may already know,  in order to be successful at anything you must have an effective system before you begin day trading. There are many tutorials and setups available on the internet providing many options for you in your quest for a good day trading system. A Good Day Trading system  can be used   in all different markets from commodities, Futures to Stocks and Bonds. The type of methodology one chooses will depend on the type of style of goals of the Trader.

My Favorite Day Trading System Hedge Formula 

I often like to trade the OEX and the SPX options when deciding on a longer term strategy, often used as a hedge to current positions. I find that these options are often slower moving and less liquid. If I see a longer term idea buying the options allow me to sit on my positions a bit longer. I define my risk basically by the cost of the options. If you have ever traded futures or Forex, you will know that the risk can go well beyond and be more extreme due to higher leverage. So all depends on my setup and how I will engage my risk strategies.

Stocks

When going long and short stocks the one thing I remember in my strategies is that I am a trader and not and investor. When I enter a stock for a trade it is often a stock so I am in and out for normally 1-2 points depending on the price of the stock. When trading 7,000-10,000 shares of a stock I do not want to eat the risk factor of being in a trade and having it go $4 against me intraday so I look for stocks that have day trading range of at least double of my target that I am trading for. For example if I am looking to day trade a stock for $2 I will make sure this pair have an average daily range of $4, this will allow me to normally play this stock then wait on it past the closing bell. I use the same concept with Forex I just adjust in a different manner.

Forex Day Trading System

Since first trading spot Forex, this has been my favorite to day trade. I trade Forex market daily. When I day trade I use 7 monitors stacked up according to importance, this gives me all the markets I need to see to help me get in and out of trades effectively and fast. I not only use moving averages when I trade but I spend alot of time to examine the moving supports and resistance areas on several different time frames then using a math formulas I decide what areas are more relevant and I highlight them on my charts. I draw trend lines on my charts to decide what pairs are poised for possible breakouts and when. I try to use my analysis to decide what pairs have the higher percentage of a breakout then I narrow my choices down. I always am looking at my S & P futures charts while day trading. This gives me a better understanding of where the risk may be heading. Using my break out strategies I mark several options for my plan.

Program Tradings Effects on My Day Trading System

One of the daily challenges of Forex trading is trading U.S. session and adapting to the 'program trading effect'.   One of the ways I play program trading is to take a counter trade during times of program trading. These buy and sell programs like to take out stops and run positions into and against certain areas that I had researched earlier in my trading day, or the night before on my charts. Adapting to these extreme measures, I feel is necessary to surviving and excelling in this ever changing market environment.  Then only way that this can be accomplished effectively is by using a stop to maximize your risk exposure. This type of fade system can be dangerous if one is not using proper risk control. This method is discussed in depth daily in our Forex Day Trading room. If you would like these methods and more you can join our day Trading room, not ready to join? signup for our twitter public account.

Gerard Mastra is Chief Currency strategist at Fxlivedaytrading.com