Jack Bernstein is the publisher of «MBH» weekly articles on the commodity markets and the author of 27 books on trading.
Within-day trade, which was once the exclusive domain of the interests of traders, trading in the exchange hall, is now fair game for all speculators. Encouraged by the large part of intra-day price fluctuations, continued availability of current quotations possibilities of powerful computers and competitive commissions and spreads, a new wave of intra-day trading methods and systems in recent years has attracted thousands of traders. Undeniably sharp sense of commerce in a single day is, however, a two-edged sword that can harm both themselves and become a winner. To be successful, intra-day trader must have the discipline of the machine, the instincts of foxes, serenity stones, surgeon skill and patience of the saint. (I also did not prevent a little bit of luck.)
As in intra-day trade is such that it attracts so many speculators in the market? Are there effective methods for intra-day trading? Successful intra-day trading is more luck or skill? Can be studied intra-day trading? Does a successful intra-day trader is different from a successful position trader? Does intra-day trading more benefits than the position?
Determination of intra-day trading
In summer 1968, after the my first few transactions on the commodity market (as it was called then). I quickly learned that the traders trading in the exchange hall, had a clear advantage over the rest of the audience. Traders in the exchange hall at the center of all activities. They knew the prices before they know all the rest. They traded for the minimum fee, and they seemed to know news that affect the price, before all others. During one of my visits to the Chicago Mercantile Exchange, I talk to the former stock exchange floor trader on the balcony for the visitors, and he asked what my trade interests. I said I had to learn how to broker turned to my account and that my knowledge of trade is very limited. He asked me whether I «positional trader» or «intra-day trader». I admit that have not heard any of these terms. He proposed the following definitions: intra-day trader trades in the interim period, one day, entering and leaving their positions during the day, but always close the transaction by the end of the day, regardless of whether they are winning, losing or empty.
This definition seemed to me quite logical. But the definition of positional trade made me stop and think for a moment. He identified the positional trade as intra-day trading, which finishes the day with losses.
After a few moments definition struck me, and I laughed. But under my obvious joy was typical of the market the truth, which never left me since that day. It is clear that the ability to take a loss at the end of the day is likely to be the salvation of many traders, because the vast majority could not accept their losses, when required, in accordance with their system, implying, of course, that they have a system!
Leaving the old ideas
While many traders are strongly opposed to intra-day trading, I do not agree with that. Long-standing cliche that has been given to intra-day trade and intra-day traders should be revalued and left. As I said earlier, computer technology, and competitive commissions and spreads altered intra-day trade once and for all. In fact, if you logically understand the advantages and disadvantages of intra-day trading, compared with the positional trade, the «balance» clearly tilted in favor of intra-day trading. This is - my list:
For and against the intra-day trading
For
1. No concerns nightly news
2. More efficient use of profits
3. Forced Out exclude losses increase
4. Capture of large price fluctuations
5. The advantage of emotions with the positive movement
6. Trade only in active markets
7. Immediate feedback on the results of transactions
Against
1. Within-day variability can be significant, increasing the risk of
2. Requires constant attention
3. The loss of a large global trend
4. The need for continued availability of current quotations
5. The profit is limited, as well as losses
6. Requires an active trade, which increases costs
7. Required iron discipline, which most traders have no
There may be others as the «for», or «against». Of the above, the most important «for» is - a quick way out of losses and immediate feedback on their results. How should these two compelling advantages of intra-day trade and I hope you agree with my assessment. But enough of philosophy and psychology - let us turn to the approaches and methods.
Technical intra-day trading
Please note that I believe that the intra-day trader would be absolutely technical trader, as opposed to fundamentalists. While, ultimately, the fundamental factors can control the market in the long run, they are not so important in the intra-day time scale, with the possible exception of price fluctuations based on the news. Effective intra-day trader has a method to capture the traffic arising from the emotional reaction to important news.
In his book «Capable of intra-day trader» I distinguish four main approaches to the intra-day trade from following the trend to trade on the support or resistance. All of them are viable methods that can also be and the technical methods of positional trade. The following is a brief overview of each method, including their advantages and disadvantages:
Breakthrough trend and following the trend
Of all the methods of trade, following a new trend or a purchase of a break up and sale to break down, ultimately, may prove most effective. According to him, the trader should be the price when they move higher or lower entering the market in the belief that the «new peaks generate new maxima», and «new minima give rise to new minima». The system of trade at the break begins with an excellent work Keltnera in the 1960th, who set the tone in the various methods used in their favor maximum and minimum price for this time format. S & P 500 in the chart below shows the ideal situation for the intra-day trader who buys at the break of resistance. As is typical for this method - although the purchase of a break up or sell to break down, tend to work fairly well, it's quite difficult to do psychologically to the majority of traders, and it requires that traders deployed position, in case of error. There are many approaches to finding, verification and risk management systems for trade breakthrough.
Trading on Support and Resistance
This approach seems to require more from the traders. This involves two aspects: first, the trader should determine the basic trend of intra-day and second, when the trend has been identified, the trader should determine the level of technical support in an upward trend and the technological level of resistance in the descending trend. When defined as an upward trend, the trader will buy from the level of support, but when the trend is defined as the top-down, the trader will sell at the levels of resistance. Strategies to fix the profit and risk management accompanies this approach. While you may think that this approach is obvious, in fact, a few traders can quickly determine the above-mentioned aspects.
Seasonal intra-day trading
Very few traders are using this approach, but I think it is viable and worth attention technique. The first measure of the work of Art in his classic book, «The behavior of prices on Wall Street» clearly demonstrates the statistical reliability of pre-Dow Jones. Meryl has shown that the chances of closing at a higher price on the day before the major American holidays were not only very high, but also statistically significant. Yala Hersh in his outstanding book, «Do not sell shares on Monday» has demonstrated the value of the use of daily statistics for market timing and related trade. I extrapolate both work to determine the percentage of time the various markets closed higher or lower than the closing of the previous day. Of course the reliability of such data is a function of historical data.
Trading on the intra-day mood
The work of Robert E. Hadadey indicator on the development of bovine consensus helped my develop an index of intra-day sentiment. The index measures the mood of the crowd on a daily basis. This allows intra-day traders who are looking for opportunities to enter the opposite side, to enter the market when the indicator reaches levels that are too high or too low. The theory is that when the mood of the day is at 90% or more of bovine, the crowd would be wrong, and therefore, intra-day trader will look for signals to enter the short side, and vice versa when the mood of 10% or less byche, the inside -day trader will look for signs at the entrance to the trade in the long side.
Accounting for other factors
This is mainly technical, philosophical and psychological problems faced by the intra-day trader. They are not significantly different from the problems faced by position traders. The only major difference is in using a temporary format.
Because our world is rapidly becoming smaller and as the market movements tend to be longer and in smaller time periods than ever before, the intra-day trade was not only a viable and manageable, but also preferable in many cases for reasons listed above. Of course, the viability of intra-day trading methods does not negate the risks of trade. The risk is always under the surface. There is no way to trade would not be complete without the accompanying risk management practices, taking into account the reality in relation to costs, such as the spread, commissions, cost of equipment, etc.
Within-day trade, which was once the exclusive domain of the interests of traders, trading in the exchange hall, is now fair game for all speculators. Encouraged by the large part of intra-day price fluctuations, continued availability of current quotations possibilities of powerful computers and competitive commissions and spreads, a new wave of intra-day trading methods and systems in recent years has attracted thousands of traders. Undeniably sharp sense of commerce in a single day is, however, a two-edged sword that can harm both themselves and become a winner. To be successful, intra-day trader must have the discipline of the machine, the instincts of foxes, serenity stones, surgeon skill and patience of the saint. (I also did not prevent a little bit of luck.)
As in intra-day trade is such that it attracts so many speculators in the market? Are there effective methods for intra-day trading? Successful intra-day trading is more luck or skill? Can be studied intra-day trading? Does a successful intra-day trader is different from a successful position trader? Does intra-day trading more benefits than the position?
Determination of intra-day trading
In summer 1968, after the my first few transactions on the commodity market (as it was called then). I quickly learned that the traders trading in the exchange hall, had a clear advantage over the rest of the audience. Traders in the exchange hall at the center of all activities. They knew the prices before they know all the rest. They traded for the minimum fee, and they seemed to know news that affect the price, before all others. During one of my visits to the Chicago Mercantile Exchange, I talk to the former stock exchange floor trader on the balcony for the visitors, and he asked what my trade interests. I said I had to learn how to broker turned to my account and that my knowledge of trade is very limited. He asked me whether I «positional trader» or «intra-day trader». I admit that have not heard any of these terms. He proposed the following definitions: intra-day trader trades in the interim period, one day, entering and leaving their positions during the day, but always close the transaction by the end of the day, regardless of whether they are winning, losing or empty.
This definition seemed to me quite logical. But the definition of positional trade made me stop and think for a moment. He identified the positional trade as intra-day trading, which finishes the day with losses.
After a few moments definition struck me, and I laughed. But under my obvious joy was typical of the market the truth, which never left me since that day. It is clear that the ability to take a loss at the end of the day is likely to be the salvation of many traders, because the vast majority could not accept their losses, when required, in accordance with their system, implying, of course, that they have a system!
Leaving the old ideas
While many traders are strongly opposed to intra-day trading, I do not agree with that. Long-standing cliche that has been given to intra-day trade and intra-day traders should be revalued and left. As I said earlier, computer technology, and competitive commissions and spreads altered intra-day trade once and for all. In fact, if you logically understand the advantages and disadvantages of intra-day trading, compared with the positional trade, the «balance» clearly tilted in favor of intra-day trading. This is - my list:
For and against the intra-day trading
For
1. No concerns nightly news
2. More efficient use of profits
3. Forced Out exclude losses increase
4. Capture of large price fluctuations
5. The advantage of emotions with the positive movement
6. Trade only in active markets
7. Immediate feedback on the results of transactions
Against
1. Within-day variability can be significant, increasing the risk of
2. Requires constant attention
3. The loss of a large global trend
4. The need for continued availability of current quotations
5. The profit is limited, as well as losses
6. Requires an active trade, which increases costs
7. Required iron discipline, which most traders have no
There may be others as the «for», or «against». Of the above, the most important «for» is - a quick way out of losses and immediate feedback on their results. How should these two compelling advantages of intra-day trade and I hope you agree with my assessment. But enough of philosophy and psychology - let us turn to the approaches and methods.
Technical intra-day trading
Please note that I believe that the intra-day trader would be absolutely technical trader, as opposed to fundamentalists. While, ultimately, the fundamental factors can control the market in the long run, they are not so important in the intra-day time scale, with the possible exception of price fluctuations based on the news. Effective intra-day trader has a method to capture the traffic arising from the emotional reaction to important news.
In his book «Capable of intra-day trader» I distinguish four main approaches to the intra-day trade from following the trend to trade on the support or resistance. All of them are viable methods that can also be and the technical methods of positional trade. The following is a brief overview of each method, including their advantages and disadvantages:
Breakthrough trend and following the trend
Of all the methods of trade, following a new trend or a purchase of a break up and sale to break down, ultimately, may prove most effective. According to him, the trader should be the price when they move higher or lower entering the market in the belief that the «new peaks generate new maxima», and «new minima give rise to new minima». The system of trade at the break begins with an excellent work Keltnera in the 1960th, who set the tone in the various methods used in their favor maximum and minimum price for this time format. S & P 500 in the chart below shows the ideal situation for the intra-day trader who buys at the break of resistance. As is typical for this method - although the purchase of a break up or sell to break down, tend to work fairly well, it's quite difficult to do psychologically to the majority of traders, and it requires that traders deployed position, in case of error. There are many approaches to finding, verification and risk management systems for trade breakthrough.
Trading on Support and ResistanceThis approach seems to require more from the traders. This involves two aspects: first, the trader should determine the basic trend of intra-day and second, when the trend has been identified, the trader should determine the level of technical support in an upward trend and the technological level of resistance in the descending trend. When defined as an upward trend, the trader will buy from the level of support, but when the trend is defined as the top-down, the trader will sell at the levels of resistance. Strategies to fix the profit and risk management accompanies this approach. While you may think that this approach is obvious, in fact, a few traders can quickly determine the above-mentioned aspects.
Seasonal intra-day trading
Very few traders are using this approach, but I think it is viable and worth attention technique. The first measure of the work of Art in his classic book, «The behavior of prices on Wall Street» clearly demonstrates the statistical reliability of pre-Dow Jones. Meryl has shown that the chances of closing at a higher price on the day before the major American holidays were not only very high, but also statistically significant. Yala Hersh in his outstanding book, «Do not sell shares on Monday» has demonstrated the value of the use of daily statistics for market timing and related trade. I extrapolate both work to determine the percentage of time the various markets closed higher or lower than the closing of the previous day. Of course the reliability of such data is a function of historical data.
Trading on the intra-day mood
The work of Robert E. Hadadey indicator on the development of bovine consensus helped my develop an index of intra-day sentiment. The index measures the mood of the crowd on a daily basis. This allows intra-day traders who are looking for opportunities to enter the opposite side, to enter the market when the indicator reaches levels that are too high or too low. The theory is that when the mood of the day is at 90% or more of bovine, the crowd would be wrong, and therefore, intra-day trader will look for signals to enter the short side, and vice versa when the mood of 10% or less byche, the inside -day trader will look for signs at the entrance to the trade in the long side.
Accounting for other factors
This is mainly technical, philosophical and psychological problems faced by the intra-day trader. They are not significantly different from the problems faced by position traders. The only major difference is in using a temporary format.
Because our world is rapidly becoming smaller and as the market movements tend to be longer and in smaller time periods than ever before, the intra-day trade was not only a viable and manageable, but also preferable in many cases for reasons listed above. Of course, the viability of intra-day trading methods does not negate the risks of trade. The risk is always under the surface. There is no way to trade would not be complete without the accompanying risk management practices, taking into account the reality in relation to costs, such as the spread, commissions, cost of equipment, etc.
Jack Bernstein
www.futuresmag.com
www.futuresmag.com
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