Formulas for Stock Daytrading when using a good risk reward strategy can make you good gains. WallStreetWindow's Free subscription service will give you access to our weekly market commentary and the doubling stocks Two Fold Formula. Click here to subscribe today

Formulas For Stock Daytrading

Investors Magazine - Mike Swanson

There are almost as many formulas for stock daytrading as there are day traders. The most successful traders will have taken techniques that have been proven to work for others and combine them into their own personal method.

Being able to match up a trading method with your own personality is the best way to make it in the markets. However, there are a few essential formulas that everyone needs to apply.

The best formulas recognize first of all, that day trading is strictly a short term investment tactic that plays out in the long run. You must be able to withstand long strings of losses and continue to stick with your system. Once you have designed a system, keep in mind that no formula will work every time.

Day trading is a numbers game, much like poker. You may have to lose or fold many hands between each big pot you take. It requires planning your work and then working your plan. The trades in themselves are quick and rather easy, but making money from day trading will take time. In addition, never play with money that you are not willing to lose.

This is important to keep in mind because the first formula that needs to be incorporated in your plan will be one to limit your losses. This is a variable business with many ups and downs. Making big profits is meaningless if you also take big losses.

Decide each day how much money you are willing and able to risk and don't deviate from that amount. Also, always remember that day trading is risky business and never get carried away on any one trade. Set strict limits on how much you are willing to make and prepared to lose on any single trade, then stick to it.

Never rush into a buy, but be willing to sell quickly. Typically, traders may hold stocks from just a few seconds to a few hours but will never keep them overnight. The most likely chance of a radical price change will usually occur from one day to the next.

Many good traders will only hold a stock until it goes up to about five or six cents before they begin to sell. You should not anticipate that a stock will continue to rise and hold on with hopes of making a killing on one deal. Take the sure profit while you have it and move on.

Likewise, be quick to cut your losses and be prepared to dump a stock if it loses two or three cents. You must be willing to take a loss on some trades and not be tempted to wait for them to rise again. Have a set point for profit and sell at that and immediately sell when you reach a set threshold for loss. For example, always sell at a five cent gain or at a two cent loss if those are the parameters you have set for yourself.

Never put all your eggs into one basket. A common formula for success is to risk a maximum of 3% or less of your total trading capital on any single trade. Being a successful day trader involves making many small deals that add up, not one big score. As a general rule, you should have enough capital to buy a minimum of 1000 shares of stock on any given day.

These basic formulas for stock day trading are the essentials for making a profit. Just like a poker game, know when to hold them and when to fold them. However, never go 'all in' on a single hand.










Formulas for Stock Daytrading when using a good risk reward strategy can make you good gains. WallStreetWindow's Free subscription service will give you access to our weekly market commentary and the doubling stocks Two Fold Formula. Click here to subscribe today


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Hello. My name is Mike Swanson. I’m the best-selling author of the book Strategic Stock Trading. In a former life I used to run a hedge fund from 2003 to 2006 that generated a return of over 78% during that time frame. In fact it was ranked in the top 35 out of 5,000 hedge funds in 2005.

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