In another example of why learning to expect the unexpected is among the most valuable lesson a day trader should remember, I’m coming off a period where I saw two days of more that $18k in profits.
For those keeping up, that’s after a fairly underwhelming January that had me seriously paring down my daily expectations. In fact, the day after I wrote that piece was the best trading day I’ve had since November. Imagine my surprise when I topped it just two trading days later.
All told, February 2019 is proving to be one of the strongest starts I’ve ever had. I’ve made $50k over the first five days of trading—that’s approximately my total from all of January.
Because of the good start and my optimism for the rest of the month, I want to focus on two themes I think extend throughout day trading: continuity and follow-through.
The word continuity is derived from “continuous” and is used to suggest an unbroken, interrelated series of events or characteristics linking two points in time. Follow-through, in general and for the purpose of this post, is what happens in between those two points.
The stock market, despite all the changes, the ups and downs, the joy and heartbreak, works because it has continuity. Its rules remain fairly constant over time and any changes in its behavior ultimately result from its core rules. The stock market’s continuity is the entire reason day traders can make money trading it, continuity creates patterns.
Of course, there are patterns I use everyday to plan which stocks I’m going to watch and where my entry and exit points will be. Levels like premarket high or high of day are derived from patterns that emerge from buying and selling behavior. Once there’s a pullback from those levels, I can decide whether I think there will be follow-through in the pattern and take a position.
Of course, continuity can cut both ways. Good looking charts breakdown just as often as they take off, and generally in the same way. Time and patience help in recognizing patterns in the market’s continuity, but new traders can learn early lessons if they pay attention and remember that the more the market changes, the more it stays the same.
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