How do I develop my day trading strategy?

[speedo]

soulfire,

Nice post and love the user name. My great uncle has a middle name as "soulfire". He moved from the Dakotas to Chicago and finally to Arizona with his family.

Thanks for the reminder of him.

Sioux?

 

[Muffhands]

DITM calls with .7-.8 delta? I'm no option whiz, but does this not sound right?

.7-.8 delta is the same as a 70-80 delta. Either out of 1.0 or out of 100.... refer to option chain....

 

[Muffhands]

For instance a 150 strike FB call is a 1.0 delta, the highest delta possible. Sometimes people say delta 100... get it?

 

[wrbtrader]

Sioux?

Yes and see pm.

 

[digitalnomad]

I'm aware of that but a DITM strike is assumed to be delta 1.0 to mimic dollar-per-dollar the underlying. At .7-.8 were talking near ATM, no??

 

[Muffhands]

I'm aware of that but a DITM strike is assumed to be delta 1.0 to mimic dollar-per-dollar the underlying. At .7-.8 were talking near ATM, no??

No..... 1.0 is the highest.... so .7-.8 would give you 70-80 cents per dollar move... ATM option with 9-12 months out will never have a delta of .7-.8.... refer to option chain..

 

[NeedToLearn]

First off, what are your expectations? Are you aware of the high failure rate (90%+) of those who try, but ultimately fail at consistent profits via day trading? You need to ask yourself what you feel is different about you that will enable you to succeed in a field with such a high failure rate? I think too many people gloss over this fact too quickly and focus instead on dreams of making "easy money". As the saying goes, if this were easy, everyone would be doing this.




All good things start with a plan - where you can focus on what your strategy is- from where your trading rules will come. It sounds like right now you are "dabbling" in multiple areas (stocks,options,futures,investing,trading) without a clear direction/plan.



You've been all over the board in trying out different investment/trading vehicles in a span of just 2 years. You are still a rookie, and there's no offense meant in that. It can take many years or even decades to become a proficient trader to the point of being able to earn a living- 2 years is a drop in the bucket. A better measurement would be how many hours have you put in learning/practicing? Most successful traders will tell you at least 10,000 hours were spent if not much more developing their skills.

The best part about learning about trading is also the worst part - you have no constraints other than to figure out a way to earn profits with a ton of different indicators and methods for you to consider. Your first task if you want to be thorough is check out all of them over a period of weeks and see if you have a preference over time. Trading simulations are great for this where you can test the waters without risking capital. Does this take time? Yep, and that's to be expected. Get rich quick and trading are only used together by scam artists trying to sell your something and the lazy/greedy looking for short cuts that are willing to buy.

You have to anticipate being on the hamster wheel of trying different things, without making any progress. The key is being diligent to keep working through your problems until you develop enough insight to get you off the wheel.

This is part of your trading plan development - taking notes of what worked, what didn't, and any connections you think you see. It can be monotonous and pain staking, but you are dealing with a free market that is essentially a moving target so it should be a given that it will take time to understand its movements to the point of being able to exploit them.




You're putting the cart before the horse. Forget about looking for a particular strategy with a certain implementation. You have to answer the question "When should I enter/exit the market to generate a profit?" Once you are able to answer that question through your own extended research and trial/error, then you will be able to see about modifying it for a particular strategy.

Keep your mind open to find ANY solution, not specific strategies.

One person can swear by a certain method while another will call that same method bogus. What matters is you finding something that you feel comfortable with that you can hone and improve over time.

I can tell you that I read lots of trading books and they are a blessing and curse. They will give you structure to start out at the beginning when you don't know how to proceed, but they can also put up invisible walls that hold you back from developing the insight to create your own working method, rather trying to find a solution from the book. Book "solutions" can be a goose chase where they present past methods that no longer work or are subject to so much interpretation that you can't duplicate. That same can also apply to trading courses. The best solution is going to come from you.

Appreciate the thoughtful response.

The 2 years I mentioned is focused on day trading futures. Stocks and options were from couple years before that. I have a finance back ground so fundamental investing is something I'm familiar with but the return is rather small compared to successful traders, especially if you don't have millions to invest already.

I'm aware of the failure rate (90%+) but I'm also aware that most quit within certain time frame. It's sort of a passion of mine to be a successful trader. Already spent thousands of hours and needed to find some direction to spend the next few thousand hours as my creativity wasn't enough to think of other ways at the moment. Hence this thread.

I find it interesting that you mentioned I should be able to answer when I should enter/exit. I would also like to know how to do this. How can one train their eyes to build this skill? I'm still at a loss.

 

[Overnight]

...A low probability 1mn trade will net one trade per hour with high losses, a 100ms high probability will net one trade per hour with high wins...

We use a $100,000 piece of software to re-recalc per timeframe per instrument every 50ms, it's taken four months to make it production ready and one year of design. The #markets including those in the top1% will punish people with high expectations by stripping their capital, which is all the market participants care about...

Are you the next HFT, coming soon to a forum near us?

 

[NeedToLearn]

Some of you people replying type long; gets crazy, Confusing, and boring.

Learn to Predict (and/or manage) the Future. That's it. That's the Secret...to Riches in the market.
Sounds very basic, but also very profound...the more one thinks and contemplates it,

You mentioned "consistent profits"...nothing in the market is essentially consistent.
You have to be prepared to experience relatively moody major swings in profits (and losses).

Those magical indicators you use to trade are a joke. Stop using them to seek endless Market gold.
Look at things from a collective, different perspective. -- Don't be a dumb steel pole, be a malleable soft flexible bar of taffy,

Indicators are like the Titanic crashing into the iceberg.
That could have slightly, possibly, been avoided...if things and variables and perspectives were different -- and more within your control and favor,

be an ET, ET
Free your mind.

Yes, if one can predict the future, one can take over the world.

I do agree indicators are mostly garbage unless you use them as a decoration on your chart. I actually tried a lot more than what was mentioned above, only to realize I'm better off without it, so I took them all off awhile back.

 

[NeedToLearn]

Buy deep in the money calls (0.7-0.8 delta), 9-12 months out on stocks you like for the long term, or even on spy/qqq if you want less risk. and then you wait. That's it. Don't make your life complicated. You will reap huge gains without the stresses and complications of daytrading. The leverage will allow you to stay 50-60% cash for rolling/opportunities/fixedincome. Thank me later.

This would have been a nice strategy during all these bull years. Can you survive black swan events though? Also this sounds better suited for someone looking to invest than generate income through trading. Far out DITM options with that kind of delta is essentially going to cost at least half the stock's value isn't in?