As you know, Philip and I have been Day Trading professionally for over 5 years and have been active traders for over 15 years. In our trading career we have been approached by fellow traders to programme some weird, wonderful and some quite exotic Day Trading strategies. The question is, how many of these Day Trading systems work?

Philip and I do see that there is a place for automation within day trading due to the quick pace that stocks can move. Sometimes accuracy can lag and human error can also play a part in what could be a failed manual system only to be a successful automated strategy.

Stochastic Trading Strategies

We have a page in our educational section on the website dedicated to Stochastic so if you dont understand the workings of the indicator please read and watch the video first. Stochastic is a momentum indicator which tells us how strong or weak the current close is compared to the previous high/low over a set number of bars. This ultimately gives us an overbought and oversold signal. Some Day Traders do actually keep their strategies as basic as this, whereas we like to be a little more exotic! By combining indicators and price action we believe this gives higher hit rates. This is just an example of the thought process of how to build your own Day Trading strategy.

How we use automated trading strategies in our trading

When you have been trading and analysing charts for over a decade you start to understand price movement and repetitive market cycles. Over time you dont even need to look at the indicators as you will know approximately where they will be plotting on the chart. However we dont advise this! Always check! By understanding the indicators and the data they present, you will soon be able to put together a Day Trading strategy of your own.

The way we mainly use automated systems within our Day Trading strategies is to configure a system that we potentially see as being profitable then use the automated strategy to back test overtime. This then gives us data that we can filter down to allow us to find the best combination of indicators and price action to deliver the most profitable Day Trading strategy.

What we achieve by doing this is making sure that we dont focus on forward testing a strategy that is not profitable. 80% of the time we manually forward test strategies that we have back tested for profitability using automation. We then use a trading simulator to show profitability and once we have successful data we then run live.

So to recap

• Understand your indicators and the information they deliver
• Build a day trading strategy using indicators
• Automate the day trading strategies using the indicators
• Back test the strategy to understand the data and profitability
• Tweak the indicators to optimise the profitability
• Then forward test the strategy on simulated trading platform
• Once that is profitable run it on your live account

The problem with any automated Day Trading strategies is that market conditions are always changing and to have a system that works in all market conditions needs time and energy spent on it. We have trading systems that we only run once we have identified the trend or the particular market condition the strategy needs to run in. So 50% automated and 50% manual will give optimal profit potential as the system does not drawdown in bad market conditions.

Remember we give you one of our Day Trading strategies in our eBook so be sure to check it out if you have not already downloaded a copy!

Nasdaqs Relatively Weak Video

Todays stock market update shows the SP-500 (ES) and the (YM) trending relatively strong compared to the Nasdaq.

Philip walks you through the thought process with the two trades from yesterday and how he entered and profited from REE and FFIV. There is also more information on the price action to the left and profit potential areas of support and resistance.

This really is a great way of getting inside of professional traders head and getting his view on the markets current market conditions. The feedback that we are getting is all of high praise and this is what makes it worthwhile to us to continue. So thanks for your support and have a great day trading.

If you have any questions relating to this Market Update or wish for us  to talk about a trading subject that youre interested in, please donât hesitate to contact us.

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About Philip

My name is Philip and in my spare time I am creating a safe learning environment for aspiring traders to learn what it takes to become a successful technical / analytical market trader.

Comments

3A%2F%2F0.gravatar.com%2Favatar%2Fad516503a11cd5ca435acc9bb6523536%3Fs%3D60&r=G /% Mak Desuza says

This is very good information. I like your post on strategy. This eBook is really very nice and should read by all stock traders. I will plan to get this eBook soon. Thanks for info.

3A%2F%2F0.gravatar.com%2Favatar%2Fad516503a11cd5ca435acc9bb6523536%3Fs%3D60&r=G /% Gary Schmidt says

Just want to Thank You so much! I believe you have one of the most valuable learning technics I have ever come across. I will continue to watch and learn as you offer this exciting information to the public. Again THANKS

3A%2F%2F1.gravatar.com%2Favatar%2Fad516503a11cd5ca435acc9bb6523536%3Fs%3D60&r=G /% Philip says