My intraday trading over the last few weeks has been plagued by inconsistency. To try to bring some improved consistency to my results I have begun setting out some guidelines by which I will be trading moving forward. I am going to share them and the reasoning in the hopes that they help others struggling with similar problems.
1) Set daily goals – Not only profit targets, but also what % of winners, average loss, average gain, desired risk/reward… etc. I realize a lot of this is determined by the market, but by setting these goals I will have a much better framework from which to evaluate my trades post close.
2) Limit trading to tickers under $40 – The reason for this is simple, any more expensive and it becomes much more difficult for me to control the trade and the loss. Also within the risk/reward parameters I trade, putting this rule in place will prevent me from ‘gambling’ on riskier setups. Not that there is anything inherently wrong with trading volatile, expensive movers, but my goal is consistency.
3) Trade only ‘in play’ symbols – by which I mean with much higher than average daily volume – generally driven by news, earnings and such. This makes the trade easier to control and levels easier to identify.
4) Trade off identified levels rather than trends – the problem I have had with jumping in on pullbacks in intraday trends is you generally don’t know it is a reversal until it is, and it generally is difficult to identify just how far a pullback will go. This has, in the past, led to many trades where I have been ‘right’ but got stopped out.
These are the rules I have developed so far, more to come as I find more mistakes to correct.