The best day trading system is the system most suited to your style of trading. The first consideration is to find or develop a system specifically designed for the asset being traded. Next consider the time frame being traded. A system created for scalping ticks may not be suitable for a swing trade using five minute charts.
Day trading systems require a means to provide entry and exit signals. They can be created from many different sources. Some traders use indicators. Chart patterns are another popular alternative. News and economic announcements are also tradable. Some day traders believe price action alone is the best day trading system.
The most important element to having the best day trading system is the trader. The trader must be physically and mentally prepared for this challenging endeavor. The trader must realize that the competition is not only professional and institutional traders, but massive computer programs. The only advantage the home based trader has is speed and flexibility.
Having the best day trading system requires the trader to be intimately familiar with the asset being traded. Trading an equity index is not the same as trading a currency or a commodity. All markets are not created equal and all markets do not respond in the same way.The jack of all trades approach does not apply to day traders. Specialized trading requires specialized traders.
Time frame selection must be carefully considered. Scalping tick charts demands a concentrated and focused trader. Swing trading five minute charts is less demanding in this area but more demanding in patience since more time may be required for the trade to develop. Longer time frames may correspond with larger losses while scalping may correspond to a larger volume of losses.
System development is a time consuming and painstaking process of trial and error. Back testing and forward testing require advanced programs, historical data, and accurate tick data. Purchasing a system may save development time but developing a system provides a deep insight into how and why a system works.
Even the best day trading system will usually not be effective under varying market conditions. Some systems may be effective in a trending market but not do so well in a trading range. A system developed for the five minute time frame may not work at all in the three minute time frame.
If a system is purchased the trader should be very familiar with the inner workings of the system. The trader should know exactly what market conditions are favorable for the system. The system should be employed only under those specific conditions. The best day trading system is only as good as the trader using it.
