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Day Trading Strategy
Reading Gary Smiths book "How I trade for a living",
I came across a reference to an interview with Donald Sliter,
a top S&P floor trader. When asked about his trading strategy
he had replied that it is a matter of understanding strength
and weakness.
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When asked to expand on that, he said, "I
scalp to the short side if we are trading weak to the Dow.
I scalp to the long side if we're trading strong to the Dow."
The interviewers were amazed that one of the biggest traders
in the S&P pit had such a simple strategy.
For me, this reinforces the idea that as an active day trader
of the futures market, it is not about developing complex,
high probability strategies; it is about having simple, logical,
high frequency strategies that give an edge. There are different
approaches to creating an edge in trading. One that I like
is to have a technique for determining the trend of the market
and then looking for opportunities in line with the trend.
One of the problems of trading trend following strategies
is that they generate frequent losses in non-trending markets.
One way to mitigate this problem is to not trade the signals
from your trend following strategy, but use them as a filter
for your trades. |
Lets say you use a moving average (or any other trend identification
approach) to measure trends; instead of buying the market
when it crosses the moving average, see it as a signal to
look for buying opportunities. So your strategy is to be a
buyer when the market is above the moving average and a seller
when the market is below the moving average. You can then
use any number of techniques for generating entry signals
in line with the identified trend. If, for example, you are
a fan of RSI or any other oscillator, use that as your entry
signal, but only take signals in line with the trend as you
see it.
When the market is trending, your trend following technique
will keep you on the right side of the market and your entry
signal is likely to produce multiple successful trades. When
the market is range bound, you will still have the opportunity
to trade profitably because you won't be trading every breakout,
you will be naturally drawn to buying dips and selling rallies
(in line with your trend strategy signals).
Malcolm Robinson
___________________________________
Learn How To Trade The Futures Markets
http://www.surefiretrading.com
Good Trading
Best Regards
Mark McRae
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