My Day Trading system in a nutshell (Part 2)

As promised, here is a summary of my system. Again, the system is not explained in detail here.

I would like to start by reminding you that a reliable system (i.e. one with a good rate of "winners") is necessary but may not be enough. What I mean by that is that you may have winners at a 85% rate and still make less money than someone who has a 55% rate of winners.

Psychology and sound money management are the real keys to success (obvsiouly, more on that in later posts). That is not to say that a bad system will do, though. Of course, the better the system, the higher the profits.

So here is a brief explanation of my system. You will likely add some personal touches, such as when you feel comfortable scaling out.

My system is a combination of the following technical indicators and criteria - the 4 steps in Bold and in italics are essential:

1. MACD (26,12,9): gives the trend direction, if any;

2. Bollinger Bands (10,2,6): indicate forthcoming "explosiveness" of price;

Less important: Stochastics (Slow: 3) give some hints regarding momentum (or strength) of the ongoing trend.

When the 2 above mentioned steps have reached pre-defined levels, a signal is triggered. The latter is validated when there is:

3. a "break-out" (critical!)

Additional conditions are as follows:

4. the level II window by showing the order book on specific stocks displays support and resistance levels and allows you to time your entry

4bis. the index trend agrees with the expected trend of the concerned stocks.

(Day) Trading has a lot to do with probabilities ... If all the criteria above are fulfilled, you will have "perfect conditions" ... in other words, the odds will be on your side.

Above is an overview of what I call "perfect conditions" - I hope you can see something (click on it) but I will post clearer screen pictures anyway soon. I will also go into more details of my system on another post.

Take care,

Mark