How to Day Trade for a Living

Other Trading Strategies
You have now read briefly about my trading strategy. You may be wondering what other traders
do. As I mentioned before, there are unlimited numbers of trading strategies that individuals
have developed for themselves. Traders often choose their strategies based on such factors as
account size, amount of time that can be dedicated to trading, trading experience, personality
and risk tolerance.
You should develop your own strategy. A trading strategy is very personalized to each
individual. My risk tolerance and psychology are most likely different from yours and from
those of other traders. I might not be comfortable with a $500 loss, but someone who has a large
account can easily hold onto the loss and eventually make profit out of a losing trade. You
cannot mirror-trade anyone else; you must develop your own risk management method and
strategy.
Some traders focus heavily on technical indicators like the RSI, the moving average
convergence divergence (also known as the MACD), or the moving average crossover. There
are hundreds, if not thousands, of sophisticated technical indicators out there. Some traders
believe they have found the Holy Grail of technical indicators, and it might be a combination of
RSI or the moving average crossover. I don't believe in any of them. I don’t think that they work
for day trading, especially over the long term.
Some of my day trader colleagues may disagree with me, but my personal experience is that
you cannot enter a trade with a systemic approach and then let indicators dictate your entry and
exit. That is my next rule:
Rule 10:
Indicators only indicate; they should not be allowed to dictate.
Computers are trading all of the time. When you set up a system for trading that has no input or
requires no decisions by the trader, then you are entering the world of algorithmic trading, and
you will lose trades to investment banks that have million-dollar algorithms and billions of
dollars in cash for trading.
Of course, I use the RSI in my scanner for some of my trading strategies, and in particular for
reversal trading. Obviously, I have scanners that rely on a high or low RSI, but those are more
conditioned to find stocks at extremes. This is not by any means a buy or sell indicator.

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