How I Day Trade the SPY
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We like to explore, educate, and share ideas involving options trading. Come along with us on our journey to demystify the complex yet rewarding world of options trading. Many people think day trading is gambling: I agree—yet I day trade the SPY almost every day. I day trade very little capital, and I direct the profits into my less risky accounts.
So why bother if day trading is gambling? Simply put, I can increase my odds of a successful return using money management techniques. I fully expect to some day lose all of the money in my day trading account—the goal is to multiply the capital I started with many times over before that happens.
This strategy works because I day trade with a tiny percentage of my entire investment portfolio, and the amount I am willing to risk remains constant—meaning that I do not attempt to compound my returns; profits are removed from the account right away. Already this year I have doubled the money in my day trading account not bad considering that we are only 8 weeks into the year. This is what I mean by money management: Though day trading is gambling, you can leverage technical indicators and your own expertise to enter and exit trades with higher success rates.
I only trade the SPY, which I have monitored for so long that my gut often predicts how it will move. I use weekly options to add leverage and reduce the capital required. This option normally has a delta around. I try to consider a day trading option spy in a consider a day trading option spy for 40 minutes max. Sure, sometimes a trade lasts a few hours, but I always close the trade at the end of the day no matter what.
I like to enter my trades around 1: I enter a trade knowing whether the SPY is bullish or bearish on that day, and I never buck the trend: I make only consider a day trading option spy trade per day. If I am trading more than that most likely I am either cocky and think Consider a day trading option spy can make more money or I am trying to fix a loss trade—both are bad ideas.
If the conditions are right I scale into a trade up to 4 times the dollar-cost average. I only scale down, never up—meaning I buy more as the price drops, and when I close the trade I sell everything I do not scale out. Doing so protects me in the case of an upward spike in the market and frees me from being consider a day trading option spy to the computer screen.
The SPY is not crazy volatile and almost always I have some money left if a trade goes against me. Plus, I never risk more than I can handle losing. Stop losses are bad because sometimes the market really has to fall before it can pick back up. I rely on my gut to time my exit one of the reasons I have not consider a day trading option spy this trading style. If a trade goes against me I simply wait for an uptick and use that opportunity to close the losing trade.
Almost every day some buyer comes in and pushes the SPY up or down faster than normal in one big trade, but if not I sell at 3: I have set these rules for myself over many years of day trading. From the start of the day the market was bullish—notice how the chart is pushing up rather than down—so I was looking to trade calls. Notice that the MACD histogram bars clearly resemble rolling hills. I benefitted from a big seller coming in right before I entered the trade, pushing the SPY down.
If this event had happened later I might have scaled in and purchased more calls, but on this consider a day trading option spy one open and one closing trade did the trick. Most winning days play out just like this example. I just painted you a pretty rosy picture of how you can generate outsized returns day trading. The thing is, every day is different and a few bad days will certainly wipe out your account. But if you adhere to the overflow method you can use day trading profits to juice the returns of a less risky trading strategy.
Day trading is also a good way to stay engaged with the market every day and sharpen your trading skills. And, of course, day trading is a fun rush. Join our newsletter today for free. You won't regret it! But How Do You Trade? I buy only calls and puts—no fancy spreads.
The times in the graph are PST. Like what you read? Options Cafe Newsletter Get our latest news delivered to your inbox.