JR, I just started day trading a few months ago. I wait for stocks to setup and breakout of resistance or crack below a support. I rarely see a big gap up continue to breakout past premarket highs unless there's some serious momentum. Within the last 2 weeks I am profitable everyday. Anywhere from $250 - $2000 per day. I would like to average over $500 a day before I go full time. I took forward to Mondays and on Saturday I don't know what to do with myself.
If you're seriously consistently making those returns consistently trading
part time with limited experience, that's extremely impressive. I don't know what sort of percentage that is for you, but if you're able to do that on both the long and short side consistently for any length of time - and can continue such returns when the markets stop being so irrationally exuberant - you should consider doing it full time for a big hedge fund or firm like Goldman Sachs and make some HUGE $ off other people's $.
Do you always liquidate your positions at the end of each day of trading? I learned years ago that doing so greatly decreased my gains. Of course doing so can also avoid losses, but in general most big moves occur outside of market hours, which it sounds like you've figured out. If you think a stock is going to beat estimates or otherwise have something good to report (such as it putting itself up for sale), these things are usually reported outside of market hours. Same with bad news generally. So if you're not already long (or short) on the stock going into the after hours, you're SOL usually - the big move will have already been made before the bell the next day, and the stock will usually stagnate and perhaps even reverse itself a bit (profit-taking).
The best ways to play those things are to 1) already be long (or short) the security; or 2) have a way of getting into the markets before and after hours (such as direct access platforms), which are generally riskier times to trade in and of themselves; or 3) my favorite for high beta stocks is to buy both a put and a call ahead of earnings or some other expected event that will likely cause the stock to move a fair amount regardless of whether the news is good OR bad.
If the stock shoots up after hours on the news, the call (long option) is exercised, and you profit. The put is NOT exercised, and you are only out the small premium you paid for the put (much less risky than shorting, and ties up far less capital).
If the stock falls sharply, you exercise the put (the right to short the stock at its earlier higher price) and not the call. And you are only out the small premium you paid on the call option.
If you're ever making more than 40% a year consistently or even just averaging that over many years, you'll be outperforming the best hedge funds on earth, and I'm sure some funds, institutions, and wealthy individuals would be VERY interested in turning $ over to you to make them fortunes.
*EDIT - I see you say you've mainly been shorting. There's been so much irrational upside to the markets this year that it must be pretty tricky to find individual securities to short with consistent success. I mentioned earlier that I've had 20% of my $ in my main account short the S&P since Nov, and I'm still down mid to upper single digits on that portion of my portfolio.
Are you mainly or exclusively going long? Or are you going both long and short?
If you've been making that $ strictly on the long side, enjoy the bullishness we've had while it lasts. I don't know for sure how far down the markets will go, and if this recent correction is just a short term blip or not. But there's no doubt the markets will eventually turn bearish on a more grand scheme if and when the Fed stops printing $ and keeping rates artificially low - which it's no secret they've done at the behest of the White House.
I remember doing very well into the summer of '07. I recall making like 30% in one month trading that summer, and my head swole up like a pumpkin. But later in the summer, the markets started to change. M&A deals dried up, and some proposed deals fell through (along with stock prices of companies involved). Companies would report earnings and forecasts above market expectations, and their stocks would actually sell off. More and more companies actually started to miss earnings and crash hard, etc, etc.
