One of the biggest ways to “win” in day trading markets is to correctly capitalize on trending days. If you are lucky and confident, you can place a trade before the trend takes off, then ride the trend up or down and get out at a big profit. For this, you have to:
- Enter early at the right time
- Be correct regarding the direction (i.e. up or down, long or short, buy or sell)
- Have a stop loss large enough so that regular price fluctuations won’t hit it and cause a premature exit (and loss)
- Have a profit target large enough for the trend to eventually hit that and cause significant profit
- Get out at the right time
Of course, there is much that can go wrong. For instance, you can buy instead of sell, anticipating the market to turn around yet you keep getting deeper into loss territory to a point where you wondered why you had a trading account to begin with. Hopefully, that never happens to you and you always trade with money set aside for high risk trading.
There are some trading systems out there that are meant to be traded only on trending days. But it is easy to think a day is trending if the market opens and goes up consistently for 20 consecutive minutes. Does that mean it will continue to do so into the early afternoon? There’s no guarantee. Is the move over? Could be. There’s no guarantee. The market can reverse at any moment. This is a reality of trading and something you have to be comfortable with. As a trader, you have to understand that responsibly and reasonably dealing with loss is a part of the “job.”
This is why hedge funds and big organizations use trading algorithms. Sure, there is win potential associated with execution speed, but some of these algorithms undoubtedly incorporate some sort of predictive qualities. Yes, companies that have millions of dollars are trying to predict the market just like you. It is true that some outright manipulate it, but that’s another discussion altogether.
So, if these companies have invested big bucks in predicting the market, who can say that individual traders cannot have any success with predicting the markets? This is why you see so many trading systems that exist. Yes, some will be more successful than others. Some will do better on trending days than others. Some will easily get “confused” in choppy conditions.
Hopefully, the video above has helped you understand how DayTradeToWin approaches trending markets, especially the E-mini S&P. The Atlas Line, ATO 2 and Trade Scalper can be used as predictive tools (though there is no guarantee they will be correct).