I just wanted to talk briefly about my bread and butter trading technique, hoping that it might be beneficial to someone, especially new traders.

My main strategy is finding simple low risk entries in potentially overextended short term situations in market and exploit them by going against them. Note that I also do standard swing trades and even some long term trades rarely, but that’s not where the fun is. Here are some bulletpoints about how I mainly trade:

- I constantly search for “gappers”, unusual volume, oversold and overbought situations. My goal is to catch when they start showing signs of reversal.

- I’m usually not interested if the daily move isn’t above 10% or weekly move isn’t above 30%. If I’m going against these trends, there should be enough room below (or above). More often than not I’ll lose and I accept that. So my wins should be phenomenal.

- I accept that trend is not my friend. That means more than half of my trades are bound to be losers. Hence, my stops need to be very close to my entries and I don’t ever move them except some extreme cases. It’s common that I’ll lose small amounts on 5 trades and 6th trade will net me a few thousand.

- To enter a trade, I must have a clear and very close stop point. And it can’t be something like “5% stop loss”. It has to be buried above a resistance, below a support, dependent on a new high or low, or defined by MA (less preferred).

- If a reversal has happened but I missed a good entry point with a good stop close by, I don’t enter the trade. Plain and simple.

- I trade with 3 accounts and have $30000 in each. I separate accounts mainly to increase my chances of good short borrows. Any excess money I just take away and do something less risky with it. I tried trading with more money, it just makes me too scared to pull the trigger. I take big positions in stocks, so can’t afford being shaky.

- 70% of my positions are shorts. Don’t get me wrong, I have no long term bias against the market. That’s not why I short. I just short because fear is more powerful than greed. In the very short timeframes, shorts will tend to give faster returns.

- I minimize my trading in the first half hour, it’s too choppy for my taste. Then I start looking for reversal signs using candles, volume pattern, behavior close to resistance/support, ability to make new highs/lows.

- Then I enter the trade with simple stop determined as described above. After that it’s pretty automatic. I don’t set price targets. I am not very fast at taking profits, which admittedly bites me in the ass sometimes. I will move stops to lock profits if I see clear intraday resistance/support points building up. If price action is all over the place, I take the risk of losing profits, but never ever let them become big losses.

- I don’t mind holding this type of stocks one night if they haven’t made the move I expected, but haven’t gone against me either. I may hold a winner overnight if closing action warrants it.

- I’ll pretty much trade anything that moves and that goes from $0.002 penny stocks to $200 AAPL. I won’t likely trade a mover with less than 200K volume though.

- I very rarely hold into earnings. That’s gambling. But I love trading post earnings volatility.

- Afterhours and premarket are best for overextended situations, gotta be alert to catch these.

- I do use margin but that’s only because I have cash to back it up immediately if need be. You should never use it if you don’t have free cash lying around.

This is pretty much it, will be glad if even one of these points inspire just one person’s trading.