How Do You Know When to Stop Trading for the Day?

28 Jan

We’ve all asked this question, so what’s the answer?

Should you stop when a specific $ amount is reached? When a specific # of points have been tallied? When you have 2 losers in a row? Well I can’t tell you what’s right for you, but I CAN tell you what I do. Over the years I have noticed that there are a handful of great days in the month and the rest are simply average. Therefore when I begin the day and I have a winner, followed by another winner, and setups continue to hit targets, I will continue to trade all the valid setups until one fails. This way, I take the most out of a highly technical day which may only happen 5 or 6 times in a month. When they come, mike them for all they’re worth!

Somethings to help…

  • Identify the type of day (trend or range bound) ASAP.
  • Determine if the setups are technical and providing reduced risk trades.

If both these criteria have been met and I continue to have winning trades late into the morning then I take advantage!

2 Responses to “How Do You Know When to Stop Trading for the Day?”

  1. Nick January 31, 2011 at 7:26 pm #

    What is your criteria for deciding whether or not it is a range bound day as opposed to a trending day?

    • Tim Racette January 31, 2011 at 7:50 pm #

      The short answer, you get a feel over time.

      I learned most of my skills about this topic from Mastering the Trade by John Carter.

      The first thing I do is look to see where we are trading in relation to the prior day. I primarily trade the E-mini S&P and the Euro Dollar, but this transfers over to equities as well.

      I always note where the breadth ratio for the NYSE opens at 8:30 CST, I stay away from trading the first 30-mins so this gives some time for the market to settle in and a trend (or lack there of) to become established for the day. As a rule of thumb if the first 30-min ES bar shows 150k or greater volume it is a sign we are going to have a high participation day.

      On a trend day we usually break out of this first 30-min range shortly after. Other questions I ask are have we filled the gap for the day? The ES loves to fill it’s prior day’s gap the following day so I always take trades in the direction of the gap if it is unfilled, unless we gap up by more than 10pts.

      Value area is another thing I look at. This is basically where 70% of the volume took place during the prior day. If we are trading within value area it is usually a range bound day.

      Where we are in relation to the pivot is another indicator. On trend days we will move through a pivot level and then pull back to it then breakout again. A range bound day we move to the pivot and bounce back.

      Hope that gives you some insight. That John Carter book talks about all of these things as well except value area. That has to be one of my top 3 favorites.

Leave a Reply