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[ Pobierz caÅ‚ość w formacie PDF ] few traders actually can define the above terms operationally. * Daily seasonal trading -- Very few traders use this approach, yet I think it is a viable and worthwhile method. The pioneering work of Art Merrill in his classic book, The Behavior of Prices on Wall Street, clearly demonstrates the statistical reliability of pre-holiday behavior in the Dow Jones Industrial Average. Merrill showed that the odds of a higher-price close on the day before major U.S. holidays were not only very high but also statistically significant. Yale Hirsch in his outstanding book, Don't Sell Stock on Monday, demonstrated the value of using day-of-week statistics for market timing and trading. I have extrapolated from both of these works to determine the percentage of time the various futures markets have closed the day higher or lower than the previous daily close. Naturally the reliability of such data is a function of the data history. "Daily seasonal composite" (above) shows a portion of the daily seasonal futures charts I have developed for this purpose. * Daily sentiment trading -- The pioneering work of R.E. Hadaday in developing his Bullish Consensus indicator was instrumental in my development of the Daily Sentiment Index. The index provides a measure of public sentiment on a daily basis. This allows day-traders who follow a contrary opinion approach to fade the public sentiment when it reaches to levels that are too high or too low. The theory is that when daily sentiment is at 90% bullish or more, the public will be wrong, and hence, the day-trader will look for timing signals to trigger short-side entry and vice versa when the sentiment is 10% or lower. Risk endures These are the major technical, philosophical and psychological issues the day-trader faces. They don't differ significantly from the issues that face the position trader. The only major difference is the time frame. Because our world is growing rapidly smaller, and because market moves tend to be larger now within the smaller time frames than ever before, day-trading is not only viable and manageable but also preferable in many cases for the reasons cited previously. Of course, the viability of day-trading methods does not negate the risk of trading. Risk always lurks under the surface. No trading method is complete without an accompanying method for managing risk and dealing with the reality of losses, commissions and the cost of quotes, equipment and time. Jake Bernstein is publisher of the MBH Weekly Commodity Letter and author of 27 books on trading. He resides in Highland Park, Ill. Back to contents page Copyright © 2000 Futures Magazine Inc. http://www.futuresmag.com/library/daytrade97/day5.html [5/14/2001 2:46:50 am] S&P 500 March 97, five minute back http://www.futuresmag.com/library/daytrade97/daypic5.html [5/14/2001 2:46:51 am] Key to day-trading: Have your 'team' in place Key to day-trading: Have your 'team' in place Day-trading is a very serious business; if you don't have all the right ingredients in place before you begin trading, you're dead. One of the most important aspects of the day-trading business is your "team:" * Your broker * Your trading advisor * Your live quote feed * Your trading software * Your back office (clearing firm) Best broker If you think you're going to be doing size -- 10-100 contracts -- then you must have a great relationship with your broker. The broker is just as valuable as the methodology. Before the opening bell, I'm in contact with my floor broker to find out what has occurred in the overseas and night sessions and what information is coming out that could affect the markets. I never trade in the face of information. You shouldn't either unless you understand what could happen if you're wrong. The broker is my eyes and ears on the floor -- after all, that is his job. I pay my broker well; however, I expect him to look after my best interests. Never select a broker on the basis of cheapest commissions. I also expect excellent executions on my orders, and I get them. I picked my clearing firm because of its commitment to the client. My clearing firm also allows every client electronic order placement directly to the trading floor with the "ZAP" system, which is cutting-edge technology and the future of day-trading. With the pace and stress involved in day-trading, it's essential to your style to trade within the capabilities of the broker and clearing firm so you can eliminate from your trading the worry of order placement and execution. For me, it's important for the brokerage firm to have great floor presence, offer 24-hour access to my account and have a fast back office. When it comes to floor brokers, I use one who has years of experience in the pits and understands my needs, which fosters a special relationship because of his patience and concern for all of my clients. Friends like these in the pits are extremely important for an off-the-floor day-trader to be successful. The trading way With a great team in place, next you add the trading methodology. Anyone trading the markets should learn and understand as much as he or she can about what to do before trading begins. It's an outrage to pay a vendor a steep price for a system when you don't know how or why it performs as it does. The markets are based upon supply, demand and psychology. To trade, you must be aware of many different scenarios and factors that will occur every day. The first item your methodology must have is a strict money management system. I don't care what you think about the market -- you need to know where you are getting out before you get in and what is the maximum loss you will sustain. I do not go into the market, for example, unless certain psychological price levels, like 50s, hold twice. Understand that in the United States we are brought up to round numbers off. (If the cab ride is $4.30, we say, "Make it $5" and add another 50¢ for a tip.) Most of the time we round off to psychological numbers like 25, 50, 75, 100. The big ones are 50 and 100. The same thing occurs in the markets every day. I challenge you to go over your charts -- you'll find that markets hold big psychological points every day. When you begin to understand this, you'll start to see there are more desirable numbers off which to buy and sell. But the markets are funny; each day the same patterns occur and it is our job to react when this happens. Every day the market goes up, down, up, etc, which is called backing and filling. The market backs and fills within a certain mathematical number every day (at least most of the time), similar to a Fibonacci parameter. By knowing this occurs every day, I never want to get into the market unless I'm as certain as possible that it is finished backing and filling. In the methodology used by my company, [ Pobierz caÅ‚ość w formacie PDF ] |