My Personal Trading Style
I think the term "niche" is far overused in the trading world, particularly among small-cap short sellers who have a similar dilution focused strategy. My style is primarily that of an equity momentum trader: taking intraday scalps and swings (long and short) on "big movers", and some multi-day swings. Although I have significant experience trading options (long and short premium), I prefer to trade primarily U.S. equities. My strategies have the potential to be scaled significantly as I am trading only liquid, high-volume stocks.
I have accounts at two different brokers, Interactive Brokers and Guardian Trading. At Interactive Brokers, I trade through their API and use proprietary automation in my trading. I am basically feeding my software ideas throughout the trading day. The system is then adaptive based on the stock characteristics and volatility - for example, how it will enter the trade if criteria are met, trade size, and trade management.
At Guardian Trading, I am mainly scalping stocks long or short (taking advantage of Guardian Trading low commissions), and also shorting hard-to-borrow stocks that I cannot borrow at Interactive Brokers.
Like any other trader, I seek stocks with high volatility and high volume. I generally trade a new basket of stocks each week and focus on U.S. exchange listed stocks (NYSE and NASDAQ). While I have experience trading forex and futures, I don't trade them often because I find that they are extremely efficient instruments. Therefore, there is less opportunity because prices are usually kept in line. Conversely, there are hundreds of good stocks to choose from every day. My scanners filter the choices down to a handful per day.
I trade mainly range breakouts & continuations, and also buy/sell deeper retracement pullbacks on stocks that meet very specific criteria. I also like to fade significant gap ups if I expect temporary excess supply in the stock. My mixed approach of long and short equity exposure on high momentum stocks, and very short-term scalps with the intraday trend, significantly reduces my performance correlation with the broad equity market. I post weekly trades on my Twitter if you would like to get an idea of the setups I like to take.
I am a bit unusual in that I trade with a laptop and just two additional monitors. I like to keep my setup as simple as possible in order to have full mobility and also reduce physical strain on the body. I use ThinkorSwim for charts and have one primary layout that includes an intraday, daily, and weekly chart. I'm primarily looking at the 1-minute and daily chart side-by-side, but will often also reference the weekly for additional support and resistance. I use very common indicators (9, 20, 200 SMA & VWAP) & draw occasional fibonaccis, but I am mainly looking at price action, support & resistance, tape and volume. I use a gaming mouse and hotkeys to assist me in charting and loading trades.
I generally trade only the first two hours after market open, and prepare for only 30 minutes. After that, I will close out the software and broker platform, and manage any remaining open positions manually from my phone. I have invested 20,000 hours to develop my strategy and system. My primary goal is freedom of time and peace of mind.
I find that an automated approach is extremely helpful for trading psychology. It helps minimize decision-making and emotions. The system uses limit orders for entries and exits as much as possible to bring in rebates to help offset commission costs. But it will use market orders if needed to ensure quick fills or close a position moving against me.
While I don't set profit goals, I am happy averaging 2-3 cents per share for scalp trades; and 8+ cents per share for multi-day swings. Many new traders don't realize that those stats are solid and will produce enviable long-term results. You do not need to be a trading wizard in order to make money consistently in the market. The most important key to success is the ability to cut losses fairly quickly.
I do not have a daily max loss limit. My overall rule is to use conservative risk, and trade within my strategies and time zones - first 2 hours (and ocassionally last hour of day). However, I do have risk settings at Guardian trading set up as a precaution.
Despite the minimal time commitment each day, I am still able to find a minimum of 10 unique setups to trade. I am not dependent on a few home-run trades each year. My overall goal is consistent (even if modest) weekly income.
What's your trading style? Do you like to short over-hyped stocks based on fundamentals? Are you primarily a long/short momentum trader relying on short-term news? Do you like to hold biotech stocks for run-ups into significant catalysts? There are multiple ways to be successful in the market. My trading style is no better or worse than any other. Ultimately, trading is a business. You need to weigh several factors when starting your business including your unique skill set and where there may be less competition in the market.
Always trade small until you have proven your edge. Good luck traders!
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