Day Trading Notes

I have begun day trading the IWM ETF. As a novice trader, my initial focus is developing good methods for day trading. I will frequently chronicle notes on my market observations and performance to track my progress.

• I experimented with placing trades using market orders.  The fills were much faster, but the prices were not as good as with limit orders.  I have missed several trades trying to use limit orders.  I may try to get a feel for trading by using market orders, then improve my trading by working on placing limit orders instead.
• Because the trading platform uses point-and-click execution, I need to have several orders ready to execute in succession.  For instance, I should have my initial buy order, my stop loss sell order, and my target sell order ready to execute before I execute my buy order.  It may also prove valuable to have one extra sell order ready to go just in case.
• ALWAYS TRADE WITH SHORT-TERM MOMENTUM!
• Since I am only placing long trades, I need to avoid trade to fade down trends.  A sideways consolidation or uptrend needs to be established before I enter my long trades.  There were three separate trading periods today: the morning was a down trend, midday was an uptrend, and the close was a downtrend.  Almost all of my trades in the morning and into the close were losers because I was trying to call the bottom of the downtrend, while almost all of my midday trades were winners because I was trading with the short-term momentum.
• I need to come up with a clearly defined list of factors that will help my define when an uptrend is starting or ending.  Once i have that list I need to review the price action from the day to get used to spotting the signs.
• It is important to identify levels and trade those levels.  In an uptrend, I should try get long near the lower level and ride it to the upper level.
• LEARN HOW TO READ THE TAPE TO IMPROVE TRADE PERFORMANCE!
• I will begin using SMRecorder to capture video of my screen during the trading day.  This way I can monitor and review the action in the tape and how that translates into price action on the chart.  Optimal settings seem to by 8 frames per second with a compression ratio of 60%.  This should allow me to record the entire days action with 3Gb.  With this video, I will be able to review the market action in the evening and on weekends to improve my tape reading skills.
• Look into trying to scalp the opening drive.
• I still need to play around with the trading platform layout to improve the my order entry/exit skills.

Daily Trading Summary (08/25/11):

Number of trades (round trips) = 11 (4W,  7L)

Trade Size = 1 share

Average Win (Winning %) = $0.14 (36%)

Average Loss (Losing %) = -$0.11 (64%)

Average Return = -$0.020

Total Return = -$0.225