When most traders hear the phrase Intraday Trading, they think of daily trading. I have never liked trading day because I have found that the day trading systems I have developed, although marginally profitable, generate more money if they are retained for an additional day or two.
There was a time when daily trading had some appeal because brokers allowed a daily trader to trade more positions for less money because, or so the reasoning was, there was much less risk if there were no overnight exchanges. Therefore, a trader with limited funds could still trade a significant position size as long as he was out of his positions at the end of the day. The conclusion was that a daily trader could take advantage of their positions more than a position trader.
But unfortunately in 2010 this is no longer the case. Daily traders became the perceived Communists of the 1950s and were blamed for all the stock market collapses of the first decade of the 21st century. Of course, day traders had nothing to do with those crises, but the government that has never understood the dynamics of market behavior anyway, however, instituted many restrictions designed to restrict daily trade.
The first and most important of these restrictions is a rule that requires “pattern day merchants” to have business accounts of at least $ 25,000. If a “standard day trader’s” account falls below $ 25,000, the account must, by law, be closed. Of course, the rule doesn’t make any sense and, to my knowledge, no one has asked the logical question: “How is it that people with less than $ 25,000 to trade could have caused a worldwide collapse of virtually every stock market? ” However, day traders were actually “little guys” with no political influence, and consequently made easy scapegoats for the government.
Anyway, in 2010, there is no good reason for daily trade. Today trading will make you need more money to earn less.
This pattern day trading rule has never really affected me because I don’t do day trading. But I had to eliminate most of my entry day stops so that my broker and government did not perceive me as a day trader. Surprisingly, eliminating entry day stops has not degraded the performance of my two and three day short term trading systems.
So if I am not a daily trader why am I interested in intraday stock trading?
The reason is very simple. Intraday data gives the operator the opportunity to better control their positions, even if they hold their positions, like I do, for two or three days. To understand what I am talking about, let me first share with you a general comment on markets.
I have said many times that I think the markets are predominantly random. HOWEVER, it is also my observation that the markets are more random at the beginning of the day and less random at the end of the day.
To work with this observation, it is very important to be able to observe intraday data and plan inputs and outputs based on time frames other than daily bars. In fact, my trading system uses two time frames, daily bars AND 15 minute bars.
The use of 15-minute bars is very important to my trading system, even though I don’t do daily trading. On Friday, July 9, 2010, when the market opened, my open trade capital was negative $ 5,000 but in just 10 minutes it went from minus 5k to 20k positive! As I say, the market is very random at the beginning of the day and I have programmed my system so that it never enters or leaves a trade in the first 15 minutes. That same Friday I closed all those positions with a good profit of $ 24,000. Can you imagine how upset he could have been if he had come out of all those good transactions when five thousand dollars were negative?
Also, if you read some of my other articles, you will notice that I prefer TIME STOPS instead of PRICE STOPS. Obviously, price stops are based on price only, while my time stops combine price AND time. If I were using only the price stops on Friday, they would have left me out of my positions at the worst possible time.
But by writing the time on my stops I avoided sudden random price changes at the beginning of the market day and made $ 24,000 in profit towards the end of the day when the markets are much less random.
Obviously you couldn’t be working with time stops without combining daily data with 15-minute bar data.
But the real point I want to make here is that intraday stock trading does NOT mean daily trading. I am a short-term stock trader, but I am NOT a day trader or Forex trader and although I hold positions for up to three days, I AM intraday stock trader and stick to 15 minute bar data throughout on market day. . Using intraday data in this way gives me a huge advantage over most other traders.
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