Day Trader Holding Stocks Overnight: Bad Strategy?

A stock trader is considered a day trader if he completes 3 or more trades within a week. Usually though trading intraday is what a day trader mainly does, without holding any stocks overnight and going to bed with no open trades. As I finished day trading yesterday and with 30 minutes remaining until the US session close, I scanned the stocks with the larger price range for the day to possibly find promising setups in the stock charts. Indeed there were some of those and given the fact the volume increases dramatically during the last hour or so each day, I would expect most of the late price actions to be more trustful. However, I decided to set very loose stop losses, until I am more confident with a trading system based on holding stocks overnight.

I have developed rules in my day trading system which could be applied to pretty much any kind of stock chart. Starting with the higher time frame stock chart and moving up to the shorter one, which will be used to pinpoint entry and exit points, is a well-known trading strategy often mentioned in popular financial books. It is not – and I think it never had been – a strategy that was known only to a few stock traders. Besides I believe any trader, who spent a few hours or days trading any stock market, could understand that price actions in the daily or hourly stock chart is much more important than in the 1-minute chart!

So, I took those rules of my intraday trading system and used them yesterday night (it’s 23:00 in Greece when the US market closes), when I selected stocks to buy or short sell. While I would set stop loss points on the 1-minute chart normally, I considered neglecting that one and preferred the 15-min chart. The hourly charts could be even better but since I [intlink id=”1096″ type=”post”]unsubscribed Esignal service[/intlink] and use NinjaTrader product connected to my [intlink id=”148″ type=”post”]Interactive Brokers[/intlink] account, the market data is somewhat limited and the hourly charts don’t make much of a sense. I looked for breakouts and trends’ continuation patterns in the daily charts, set the stop losses in the latest easily pointed out price retracement in the 15-minute stock charts, calculated the number of shares for each stock and entered 7 long trades and 2 short trades before the US stock market called it a day.

I tried trading more than 200 shares per stock as that equals to the minimum Interactive Brokers’ [intlink id=”328″ type=”post”]commission[/intlink] ($0.005 per share, $1 minimum) so if the stop loss in the 15-minute chart didn’t allow me to buy or sell more than that, the stock was rejected. On the other hand, I very rarely trade so few shares, as I can set much tighter stop losses trading intraday on the 1-min charts. Yet, I’m still looking to risk no more than $100 per trade, as I do in day trading.