Day trading together with trend investing. That is not day trading for trend investing, but the combination of both for diversification and a better usage of capital. The beauty is in principal that you could use intraday margin and be over night still safe with zero margin.
A second advantage is the possibility to hold a day trade that turned out to be more than good for some days or even switch it into the long-term holding zone.
What are the pitfalls? The biggest issue is probably a psychologic one. Clearly for these two very different trading operations are two different systems necessary. Unless you are going to trade fully automated, it is easy to mix up both trading styles. That is like trying to sit between two chairs and landing in the trading Hades with your bum.
One idea to protect yourself against mixing up trading systems is to mechanize as much as possible. For the short-term horizon the solution could be to use the simplest possible day trading system. Pick the right stock and ride it into the close.
He he, sounds very simple, right? It is not completely mechanic, but is has few and only simplistic trading rules. Part of the automation is to use stop orders for opening and closing the trade. If the stop loss doesn’t get touched throughout the session, just sell into the close.
Simple trading system are often astonishingly robust. That is, they mitigate market risks and they are less prone to execution failures, which is the point here.
For the long term it is probably much harder to come up with something automated that indeed works…
Trend trading works. That is why almost all systems with simple moving averages, crossings of them, or somewhat more elaborated flavors like exponentially weighted ones work also. But they frequently don’t work well enough to be convincing. That is probably the reason why so many give up frustrated, mutate completely to be value investors, and effectively become counter trend traders.
What if you could align your investor’s good nose to growth stocks or other potential offering investments, select those that already show a trend and leave the rest to a trading machine that automatically swing trades the trend?
You would have your hands and trading mind free for your real passion, which is day trading… or strolling down the beach.