Tuesday, November 15, 2011

Day Trading Systems for the Time Challenged

Picking Trades Can Be Overwhelming If Your
System Doesn't Keep You Ahead of the Market
One criticism I hear consistently about day trading systems is that in order for them to work an investor has to pay constant attention to the markets and positions. This should not be the case however as most brokers offer advanced tools and order execution methods which allows the time challenged trader to get in and out of the market without sitting in front of a terminal all day. It stands to reason that good day trading systems will take advantage of these remote / automated trade trigger mechanisms allowing the investor to stay engaged with the market in a manageable amount of time. We'll look at what tactics a well designed method might use to help time challenged traders compete in the global financial markets.

Planning Ahead: The Key Tactic of Absentee Day Trading Systems

It stands to reason that if someone is going to attempt to trade the markets without sitting at their desk all day they had better have planned out their strategy in advance. A good method would then either require research over the weekend (outside normal market hours) or provide actionable information outside these hours. It then is up to the trader to make selections based on either their own research (very time consuming) or information received from a third party source (from a subscription based service or other computer algorithm perhaps). The point is in order to compete in the financial markets the absentee trades have to be planned in advance in anticipation of expected asset price availability. Once an investor has made a few choices they can then use some of the advanced tools provided by their broker to position themselves for future active / live sessions.

The Entry Stop: Getting in When the Price Is Right

One of the most important tools advanced brokers provide is the entry stop. It allows (as the name suggests) entry into new positions under certain price conditions. Good day trading systems take advantage of this tactic by setting up triggers / orders prior to market open - allowing the trader to pick a preferred entry price point then set the order to execute in absentia should the pricing target be hit. The ability to open positions in this manner immediately creates risk in the portfolio which the absentee trader has to manage - but fortunately other tools exist for this purpose.

The Trailing Stop: Avoiding Big Losses

Once an investor has taken on risk in their portfolio by adding assets the next headache to avoid is the risk of large losses. This is done principally by setting a trailing stop order at the same time the research and asset selection is done on the entry stop order. Put another way, the two tactics are used in pairs together - namely one sets the opening order and the exiting order (or orders) at the same time. The trailing stop does not come into effect unless and until the entry order has fired first (hence the name trailing).

Daily Trading Signals: Tightening the Noose on Profits

The last key element of profitable day trading systems involves taking a small amount of time each day to make tiny adjustments to the trailing orders as the markets continues to move in the investor's favor. Most people don't have the time to monitor their portfolios constantly but could (in a pinch) spare 15 minutes a day to react to daily trading signals to gently tweak the orders upward when the market moves favorably.