How Do You Choose the Best Day Trading Strategy?

The wealth of information available for you in order to learn how to day trade can be overwhelming. Speaking from experience, when I first started intraday trading I found it hard to see the wood for the trees. What with all the books, blogs, magazines, videos, seminars and all other media out there, it is not surprising that the majority of day traders fail to even break even. Statistics just released indicate that just over 97% of new day traders, who have been blinded by the potential wealth in the markets, fail to break even within a year. This is a huge statistic, and can be directly attributed to information overload. So how exactly does a trader choose the best day trading strategy?

Consider this – for every trade there are two opinions. If you buy stock then someone else has to sell it to you. Conversely, if you sell stock, somebody else has to enter the market in order to buy it from you. So who is correct? Clearly both traders cannot be right – they both have different strategies to help guide them into market entries and exits. Let us take this example further – let us assume you made the wrong decision and you are now at a loss. Exactly what signals did your day trading strategy tell you with which to buy this stock?

Believe it or not, there is a silver lining to the cloud when you make consistent losses. By simply keeping a day trading diary you have the opportunity to go back through the day and examine each of your trades. I attribute my success as a day trader purely down to the fact that I kept such a diary. During the heat of the day, at times it can be hard to take a step back and really analyze if you are making the right trading decisions – by keeping the diary, after the trading day has completed you can go back and check each of your trades. If it was a winning trade, what exactly made you take it? Establish this factor and multiply it in your strategy. More importantly, if you took a losing trade, what made you take it?

This last point is essential. Perhaps you are struggling to break even as a day trader? By evaluating your days trading decisions you then have the opportunity to correct your strategy going forwards. For example, did you take a losing trade by going long stock when the 10 day exponential moving average passed the 3 day? If so, maybe look at adding a buffer in your strategy – so under certain circumstances you go long only when price has passed 1% of the average.

Put simply, this is how to develop the best day trading strategy you can. Specifically, this is because you are developing a style of trading suited specifically for your chosen timeframes and personality. To reiterate this, it is pointless taking other traders strategies as maybe they trade at a slower or quicker pace than you are comfortable with. I appreciate this does sound like much trial and error – and it should! This is the way the best day traders in the world have molded how they trade.

In conclusion, the way in which to develop the best intraday trading strategy is to build your own one. And the way in which you do this is by examining and evaluating your previous winners and losers. Good luck and happy trading.