I can guarantee if you follow my advice on this ONE topic your profitability and consistency will skyrocket immediately. I have a couple of relatively simple questions for you. Why do stocks move up or down during the day? What causes and uptrend or downtrend? Of course the answer is order flow.
How much do you actually pay attention while you are trading? How often do you make mental notes which sectors trade from positive to negative or vice versa during the day? There is big money in this information. As the ebb and flow of the market unfolds during the day, the indices will tell you where the institutions are allocating money. Make it your business to be following them. Don't fight the tape, don't have an opinion. You definitely should have trading ideas, but not an opinion.
What's the difference? When you have an opinion you will place trades and hope the market proves your brilliant analysis correct. You will get steamrolled if the market doesn't comply. If you have ideas you will have profit targets and stop loss parameters in place, you will simply place the trade let it unfold and then do what you planned to do.
Now back to the main subject of the article. As an intra day equity trader I am only concerned with today's order flow, the buying and selling pressure from today's open. When the bell rings to open the market I change my stock watch to sort my universe "change from the open." Think about it, unless you have an over night position why in the world would you care if the stock is positive or negative from yesterdays close?!
If the market is trading positive "from the open" I sort my list by stocks positive from the open. I reverse the sorting if the market is negative from the open. I want to be trading stocks trading with the market right now.
Now let's take it one step further, if the market reverses intra day I will immediately change the sort in my list from the open to the new direction of the market. In other words if the market was trading positive from the open all day and then suddenly reverses I want to be short selling the stocks that were weak, not the stocks that were strong all day! Remember pay attention.
Think about it, if those stocks were weak when the market was strong they will be the stocks to fall the hardest as the market comes down. Paying attention to intra day relative strength from the open will put your trading career miles ahead of where it is now.
So to wrap it up, never short sell strong stocks and never buy weak stocks. I know you will do it and lose money 9 times out of 10 but you will only remember the one time! LOL
To be a consistent money earner in the stock market you must be trading what is most likely to happen next. Stick with the intra day order flow and you will be one happy trader.
Until next time.