When you are looking for trading ideas, what you really want are situations in which the market has priced the stock, currency, or commodity too low or too high. In other words, the market has temporarily oversold or overbought the product, and during the short term (the trading cycle), there is a good chance that other traders will react. This reaction by other traders to a mispricing causes markets to reverse, even if only slightly. You should be thinking in the immediate short term when evaluating day trading situations. Look for opportunities in which you can place a trade that will gain momentum in your direction, with the intent of then getting out of it as soon as it makes a profit.

There are many sources of information to help you interpret the market’s levels and determine entry and exit points. In the beginning you learn what sector to day trade, when is a good time to place and order, and at what price to place the trade. To get a big picture of the market, you should read and listen to as much information as possible.

Granted, some information may be biased, sensationalized, or common knowledge, but it is a good idea to begin each day trading session by accessing at least four to five sources of information before you place your first trade. This will get you into the mindset required for a successful day of day trading.

When you read or listen to market and economic reports, keep in mind that you are not only looking for facts as to what sectors and prices you are going to be trading, but you will also be determining what the other day traders and the other market participants are thinking. Consider it intelligence gathering (by looking into the other team’s play book) to get into the right frame of mind when watching TV business shows, listening to radio shows that report on the market, and reading Internet forums. Remember, these are public sources of information and should be treated as a general insight into the market, not as a determiner as to your day trading activity.

You should be referring to your broker’s reports and daily newsletters as well as looking at your five minute, one minute, and thirty second charts for today’s day trading entry and exit points. It is really important to go into each session with a big picture and general overview of what sectors will be in play during the day. Base each and every commitment of cash and margin on your individual interpretation of your trusted sources along with technical interpretations using short timeframe charts.

When you begin each day trading session in a top-down approach (listening to the news, reading the reports, looking at long timeframe charts, switching to short timeframe charts), you will get into the market’s mood very quickly. If you have an idea that a stock, FX pair, or future will move, sit back and watch the short timeframe chart move up and down with each buy and sell order. You will be able to notice a slight creeping into one general direction and with the general big picture of the market and that sector, and be able to confidently begin placing trades into the market.