Full question: Do you do any day trading? I know you like to enter full size around the base/moving averages as you should in a trend trading system but do you have any playbook set ups for acting on day trading set ups such as adding more size to your existing holdings if they form an intra-day pattern where you can add size and play momentum? I know I should treat each new set up taken as a fresh idea and must keep data of the set up and then let the data decide whether I should be implementing day trading set ups into my system. I was just wondering if you personally act on those day trading set ups and if not then why not? This is something I am currently working on and admittedly the day trading set ups are my worst performing plays and really dilute my pnl on my winning stocks. I would also like to add I do not manage a big account (50k or so) and am keen on accelerating my growth and I think day trading can help me generate more alpha. I apologize for the lengthy question but thanks in advance. Love your work mate, Prost!
I am a trend follower at heart and started with O’Neil’s CANSLIM moved over to Dan Zanger’s very opportunistic momentum trading without much success and later switched over to a more active O’Neil style approach as proposed by Gil Morales. Dan is using add-on entries a lot which stems from his .com runup experience where he made some 20k% in one year (Guiness World Record). However this approach didn’t work for me.
Nowadays I just read volume and price action based on original work of Richard Wyckoff and basically try to catch the swings between consolidation areas just like O’Neil but without sitting through the bases. I used to trade O’Neils classic breakouts during the first couple years and then switched over to buy early via Pocket Pivots first and now mostly focus on quiet and tight trading and earnings gaps. Pocket Pivots or Base Breakout just give me clues but no signals anymore. I buy early, then scale-out some into strength and sit tight with the remaining position until the next proper setup shows up. There is some intraday action when stocks hit initial scale-out territory and also during the process of establishing the initial position size (It is not always just a straight out full size order). When stocks break I don’t necessarily wait for the close to exit but already act intraday as well.
However I am not day trading at all. I never enter a trade with the idea that price hits my target the same day. It might hit the scale-out on the same day though as my timing with quiet and tight entries is pretty sharp sometimes.
I make roughly 120-200 trades per year but there are activity peaks when I sense that a window of oportunity is open but not much in between.
Write this down: A multimonth 100%+ swing move is not initiated by an intraday pattern. Stocks must undergo accumulation over weeks or even months in order to muster a real price expansion.