Thursday, February 7, 2008

Day Trading

7 Feb 2008

Day trading is a process of multiple buyings and sellings which are conducted within a day. These are done with the intention of maximizing the profits. Normally, the profits taken for each transaction are small but with multiple number of buyings and sellings, the profits gathered are bigger. In CPO, day trading can only be practised if the range of votality in a day is big and so is the volume. Usually if the range is above 25 points a day then day trading is said to be viable to be considered. If ,on average, the range is less than 25 points, it is advisable to bring forward the trading to the next day before any close position is to be undertaken.

In my case, at the present situation where the price of CPO is among the highest ( The highest was on 5 Feb 2008 where it touched RM3458 ) in history, I would prefer to do day trading rather than bringing forward to the next day because it is less risky especially for a small investor like myself. Anyway if the votality is too high and voilent ( the price per tick is very vast between 5 to 10 points ), then I would prefer to stay away from the market.
In general, there are a few strategies that I use when it comes to day trading of CPO futures ;
1) I would figure out the short term trend of the market. The long term trend is not to be determined.
2) After determining the trend, then I would forecast the direction of the market. e.g. If the trend today is bearish ( after the
market closes ), then I would set the entry for tomorrow either to sell or buy based on opening of the day by using
my own devised strategy.
3) The opening is very important. As I have indicated in previous postings, the price of CPO has a close relation to the price of
soybean oil in US and also to the world's price of crude oil. So if the opening today is higher than the close of yesterday,
normally it has already indicated those factors.
4) During the trading of the day , I would only use 4 types of trendlines to execute my positions such as ; Head and Shoulder
Top or Bottom, Rounded Top or Bottom, Double/Triple Top or Bottom and Middle Cut Top or Bottom.
5) If the opening of the day is not within the forecasting range, then I would simply close the computer and take a day off
Since today ( 7 Feb ) and tomorrow is a bank holidays in Malaysia, the market will only open on this coming Monday ( 11 Feb ). After the closing of that day, I would make a price forecast for the next Tuesday! As I pin-pointed earlier, my forecasting is not always right, it tends to be wrong at times!

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