Day Trading is a tricky business. There are dozens of ways to shoot yourself in the foot. You can make good trades 3 days straight, then give it all back on day 4. So a clear analysis of the circumstances behind successfully trading are important in order to become consistently profitable.
Let me say at the outset that I believe it is possible to be consistently profitable as a day trader.
1) Is this trade based on a setup at the daily or larger time frame? Examples of daily setups we consider action worth include:
| Bounce off support/resistance, or retest after bounce |
| Breach of support/resistance |
| Key Reversals |
| Bullish/Bearish engulfing |
| Close above the high of the low bar |
| Breakout to new all time high |
| Bullish or bearish elephant bar |
2) Is the trade consistent with the general direction of general market that day, up or down? Not applicable to the Fade the Gap trade. If not take a pass.
3) How far away is the stop, and is that amount small enough a loss for you to be able to live with if you're wrong.
4) How far away is the target and is the 2 to 3 times the stop or more?
If all that lines up and the material is right, execute according to plan.
Enjoy your weekend.
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