Day trading time frames
where to start and how to progress.
Starting Out: The Basics
1. Focus on Large Cap
Stocks that are volatile: Begin with 5-8 large-cap stocks. These
are typically more stable and provide a good learning ground. (example nvda,
tsla, qqq, meta, aapl..)
2. Use a Simulator: Before
diving into real trading, learn to trade on a simulator. It's risk-free and
provides invaluable experience. If you're serious about learning to trade spend
the first year learning to trade without the pressure of profit-making.
If you have the temptation to start with real money, resist it. The harsh truth
is, without the proper groundwork, you're merely gambling. And if that's the
path you choose, you might find better odds in Las Vegas.
3. Top-Down Approach: Start
with higher time frames and gradually work your way down. This helps in
understanding the broader market trends and gives you more time to make
decisions and see how setups/patterns form. Day trading takes time so
don't rush the process and focus on the higher time frames when learning and
work your way down.
4. 20 EMA Trend/Direction:
Base all trades considering the trend or direction
indicated by the 20-period Exponential Moving Average (EMA). Keep the odds in
your favor.
Swing
Trading: Daily Chart Focus
Ideal for Beginners: If
you're just stepping into trading, swing trading using daily charts is a great
starting point.
Why It's Beneficial:
- Suitable for small trading accounts.
- Trades can play
out over 1 to 3 days, giving you time to analyze.
- Less stressful
as it doesn’t require constant market watching.
- Ideal learning
time frame
- Daily charts
can be easily studied from the past to speed up your learning process.
- Focus
on one or two setups, like the End of Day Setup or Zones with larger stops.
Day
Trading 15-Minute Chart: for those comfortable
with daily charts, move to the 15-minute chart.
Focus on Early Trades:
- Ideal learning time frame for day trading. Will force you to observe
the market for the first 15 to 20 minutes without making any trades.
- Concentrate on
the first 1 to 6 candles of the day.
- Stick to one or
two setups, such as the 15-minute go or the first pullback on strong
stocks.
- Trade the index
funds (QQQ, SPY) and large caps stocks
- It's not about
trading frequently, but trading smartly.
Day Trading 5-Minute
Chart: Narrowing Down the time frame, the charts will move quicker
so will your decisions.
When to Use: Ideal
when focusing on strong 15-minute candles, looking for the first pullback on
the 5 minute chart as setup.
Stock Limit: Monitor
no more than 4-6 large cap stocks for this setup.
The
1-Minute Chart: Avoid starting your trading journey on the 1-minute time
frame. The pace is rapid, which is why it's not advisable for novices or those
prone to impulsiveness. In this environment, mistakes happen swiftly and can be
expensive. If you're not well-versed in what you're doing, the cost of your
education could skyrocket. Commit to trading on this time frame with real money
only after you've consistently demonstrated success on a trading simulator.
Strategy: Focus on
ONE strategy - the first pullback is the one I focus on. If I don't catch a
pre-market gap and go trade I may look at the 1-minute pullbcak. Limit yourself to monitoring no more than 4 stocks
for this time frame.
Pre
Market Gap and Go Setup
When It Works Best: This
setup thrives in trending markets and when aligned with market conditions.
My Trading Routine:
- I limit myself to 2 trades max between the Pre Market Gap and Go and
the 1-minute pullback.
- Then I focus on
6 stocks/index funds for a clear 5 and 15-minute setup that are outside
the prior day's range and near to above the pre-market high or low.
Risk
Management and Setup Selection
1 to 1 Ratio Rule: Aim for
a 1 to 1 ratio in your trades. For instance, if your stop size is $0.50, set
your exit goal at $0.50.
Strengths and Weakness: Understanding
your strengths and weaknesses is vital to crafting a successful trading
strategy. Acknowledging these personal traits allows you to build a plan that
plays to your advantages and mitigates your less favorable tendencies.
It's imperative to not
only recognize your strengths and weaknesses but to also actively incorporate
them into your trading plan. Write them down, embrace them, and let them guide
you.
My Strengths - My
money management discipline and a well-defined risk management plan.
My Weakness: While I
know the proper setups, I sometimes grapple with patience and end up taking
sloppy trades to justify dragging myself out of bed at 5:45 am to
prepare. However, preparation does not necessitate action; avoiding a trade can
be just as valuable as making one and this has been my challenge. My trading
growth came with the realization that passing is ok, there is always another
day and trade. Lucky my strengths offset and minimize my weakness. This
self-awareness led to realize less is best.
- I limit my focus to a select number of stocks to maintain sharp
analysis, particularly within the first 20 minutes of the trading day.
- For the
pre-market gap and go, along with the 1-minute trades, I've imposed a
strict limit of two trades maximum to reinforce discipline. I then move
over to the 5 and 15 minute charts focusing on a small group of
stocks/indexes to trade
- When using the
5 and 15-minute charts, I adhere to the same limit of two trades, ensuring
that I engage only when conditions meet my predefined criteria.
By understanding my
weakness, I've set these boundaries to better harness my strengths, mitigate
my urge to always have to make a trade, and focus on the best setups.