What would this day look like to a day trader?

[farmerjohn1324]

January 30th. S&P500.

It lost over 1% almost immediately, then gained about half of that back before noon, before losing it again by about 1pm. Then, rose to basically break even for the day.

Let's say this day trader is trading the e-mini futures contract.

Would this trader have gone in to the day with a definitive guess of either "up" or "down?" Would they be reacting throughout the day? Would they have limits in place?

Would they care about WHY the price was behaving as it was?

 

[traider]

I remember that day, you can't predict much because it is just the biggest player squeezing out the people who are positioned for the break down before the actual huge dump on Friday. How do you predict the biggest trader mindset? You can't because he can change his mind at any time. Only hft can react fast enough because their forecast horizon is so short.

 

[Snuskpelle]

"Would they be reacting through the day?" If it's in their plan/strategy. Obviously, the profit potential is far greater on days like these if you can successfully keep up with the wild swings.

"Definitive guess on up or down"? I guess many trade with a preconceived bias (e.g. bull or bear market) but some traders deliberately try to avoid that.

"Why they care about why"? Depends entirely on trader. You can trade with market as a black box but IMO there's is minimal edge in price alone without either a bias or other inputs.

This day was pretty good (if not perfect) for trend following strategies. So as long as you had a good idea that the day would trend, you would have made money regardless of direction.

 

[DevBru]

There is no way too answer your question since every trader has a different way of approaching the markets.

 

[farmerjohn1324]

"Would they be reacting through the day?" If it's in their plan/strategy. Obviously, the profit potential is far greater on days like these if you can successfully keep up with the wild swings.

"Definitive guess on up or down"? I guess many trade with a preconceived bias (e.g. bull or bear market) but some traders deliberately try to avoid that.

"Why they care about why"? Depends entirely on trader. You can trade with market as a black box but IMO there's is minimal edge in price alone without either a bias or other inputs.

This day was pretty good (if not perfect) for trend following strategies. So as long as you had a good idea that the day would trend, you would have made money regardless of direction.

Can you define "trend following strategy" or give an example of one?

 

[wrbtrader]

January 30th. S&P500.

It lost over 1% almost immediately, then gained about half of that back before noon, before losing it again by about 1pm. Then, rose to basically break even for the day.

Let's say this day trader is trading the e-mini futures contract.

Would this trader have gone in to the day with a definitive guess of either "up" or "down?" Would they be reacting throughout the day? Would they have limits in place?

Would they care about WHY the price was behaving as it was?

It really shouldn't matter to you because you've already given up on daytrading (roulette to you).

Yet, I will say this...its not often that a daytrader will be using line charts. Last time I've met a daytrader using line charts was about 10 years ago. Also, you already mentioned the market context of the trading day in another thread.

Common sense would then kick in and you would be looking for trade signals when the price action is moving in the direction of the market context...also common sense would have you ignoring trade signals in the price action (as in stepping aside) when the price action is moving against (opposite) the market context of the trading day.

Regardless, it no longer matters to you...just let it go...daytrading is not for you.

wrbtrader

 

[NQurious]

its not often that a day trader will be using line charts.

I keep a line chart on one of my screens - keeps me from doing anything stupid. Many retail traders might surprisingly find themselves on the right side of the equity curve if they looked at a line chart rather than trying to interpret candlestick shapes.

The reason retail eschews the line chart is that retail thinks only in terms of risk/reward (not as easily seen and accurately calculated on a line chart) and does not think in terms of high/low probability and edge (far more easily seen on a line chart). The OP is a case in point, btw.

 

[wrbtrader]

I keep a line chart on one of my screens - keeps me from doing anything stupid. Many retail traders might surprisingly find themselves on the right side of the equity curve if they looked at a line chart rather than trying to interpret candlestick shapes.

The reason retail eschews the line chart is that retail thinks only in terms of risk/reward (not as easily seen and accurately calculated on a line chart) and does not think in terms of high/low probability and edge (far more easily seen on a line chart). The OP is a case in point, btw.

Most daytraders I've met are using bar charts. Next group using candlestick charts and the next group not using any charts because they're order flow / market depth / DOM traders for their trade decisions.

I have heard of traders the way you describe yourself but not any trader exclusively using line charts as in there's no other type of chart being used.

wrbtrader

 

[NQurious]

I have heard of traders the way you describe yourself but not any trader exclusively using line charts as in there's no other type of chart being used.

I know of only one and he is old and he's been doing this a long time and so you are right that it is rare indeed. But I do't believe it is because other charts have an inherent advantage over line charts.

 

[Snuskpelle]

Can you define "trend following strategy" or give an example of one?

In plain English, add more to the position when price moves in your favor. Refrain from doing so (or even exit) if the opposite happens. This ensures frequent smaller losses and rare big wins when a trend actually happens. Initial direction doesn't matter too much because you get a small loss if incorrect.

Google for many alternative definitions with variations.