| When most traders hear the phrase Intraday Stock | | | | The reason is very simple. Intraday data gives the |
| Trading they think of day trading. I have never liked | | | | trader the opportunity to better control his positions |
| day trading because I have found that day trading | | | | even if he holds his positions, as I do, for two or |
| systems that I have developed, although marginally | | | | three days. In order to understand what I am talking |
| profitable, make more money if they are held onto | | | | about let me first share with you just one general |
| for an extra day or two. | | | | observation about markets. |
| There was a time when day trading had some appeal | | | | I have said many times that I believe markets are |
| because brokers allowed a day trader to trade more | | | | predominantly random. HOWEVER, it is also my |
| positions with less money because, or so the | | | | observation that the markets are more random at |
| reasoning went, there was much less risk if no trades | | | | the beginning of the day and less random at the end |
| were held overnight. Hence a trader with limited | | | | of the day. |
| funds could still trade significant position size as long | | | | To work with this observation it is very important to |
| as he was out of his positions at the end of the day. | | | | be able to observe intraday data and plan entries and |
| The bottom line was that a day trader could | | | | exits based on time frames other than daily bars. My |
| leverage his positions more than could a position | | | | trading system does in fact use two time frames, |
| trader. | | | | daily bars AND 15 minute bars. |
| But alas in 2010 this is no longer the case. Day | | | | Using 15 minutes bars is very important for my |
| traders became like the perceived communists of the | | | | trading system even though I do not day trade. On |
| 1950s and got blamed for all the stock market melt | | | | Friday July 9, 2010 when the market opened my |
| downs of the first decade of the 21st century. Of | | | | open trade equity was negative $5,000 but in only 10 |
| course day traders had nothing to do with those | | | | minutes it went from minus 5k to positive 20k! Like I |
| melt downs, but the government that has never | | | | say the market is very random at the beginning of |
| understood the dynamics of market behavior | | | | the day and I have programmed my system never |
| anyway, nevertheless instituted many restrictions | | | | to enter or exit a trade in the first 15 minutes. On |
| designed to restrict day trading. | | | | that same Friday I closed out all those positions with |
| First and foremost among these restrictions is a rule | | | | a nice profit of $24,000. Can you imagine how upset |
| that requires "pattern day traders" to have trading | | | | I might have been had I exited all those good trades |
| accounts of at least $25,000. If the account of a | | | | when they were negative five thousand dollars? |
| "pattern day trader" falls below $25,000 the account | | | | Furthermore if you read some of my other articles |
| must, by law, be closed. Of course the rule makes no | | | | you will note that I prefer TIME STOPS over PRICE |
| sense at all and to my knowledge nobody has ever | | | | STOPS. Obviously Price stops are based on price only |
| asked the logical question, "How is it that people with | | | | whereas my time stops combine price AND time. If I |
| less than $25,000 to trade could have caused a world | | | | was using only price stops on Friday I would have |
| wide melt down of virtually all equity markets?" | | | | been stopped out of my positions at the worst |
| Nevertheless day traders were in reality "little guys" | | | | possible time. |
| with no political clout and consequently they made | | | | But by writing time into my stops I avoided the wild |
| easy scapegoats for the government. | | | | random price swings at the beginning of the market |
| Regardless, in 2010, there is no good reason to day | | | | day and took $24,000 in profits towards the end of |
| trade. Today day trading will cause you to need | | | | the day when the markets are far less random. |
| more money to make less. | | | | Obviously I could not be working with time stops |
| This pattern day trading rule never has really | | | | without combining daily data with 15 minute bar data. |
| affected me because I do not day trade. But I did | | | | But the real point I wish to make here is that |
| have to eliminate most of my day of entry stops so | | | | Intraday Stock Trading does NOT mean day trading. |
| that neither my broker nor the government would | | | | I am a short term stock trader, but I am NOT a day |
| ever perceive me as a day trader. Surprisingly the | | | | trader or a swing trader and even though I hold |
| elimination of day of entry stops has not degraded | | | | positions for as long as three days I AM an Intraday |
| the performance of my two and three day short | | | | Stock Trader and I am glued to 15 minute bar data |
| term trading systems. | | | | throughout the market day. Using intraday data in |
| So if I am not a day trader why am I interested in | | | | this manner gives me an enormous advantage over |
| intraday stock trading? | | | | most other traders. |