A Simple Framework for Daytrading

05/18/2011 11:15 am EST

Focus: STRATEGIES

Anne-Marie Baiynd

President and CEO, TheTradingBook.com

By applying Fibonacci to just two commonly used indicators-Bollinger bands and moving averages-daytrader Anne-Marie Baiynd is able to trade a basket of stocks clearly and consistently.

I'm talking daytrading with Anne-Marie Baiynd. Anne-Marie, nice to see you. What's your daytrading strategy?

Well, I stay with the same basket of stocks so I don't have to constantly search.

How many in that basket?

Anywhere from 50 to 100, depending on how their cycles are running. I'll have alerts set up to look at those special events, maybe coming into the 50-day moving average or the 200 (day moving average) or something like that, and that will alert me to the specific trend.

Because I am a trend trader, and I'm a momentum trader. I'll do that, but I'm very simplistic in my approach. I use two technical indicators: I use Bollinger bands and moving averages.

Just those two?

Well I use the Fibonaccis on top of that, but yeah, just those two.

I look for where the heavies are sitting, and the steeper the slope, I know the more acceleration that I have, and so I'm ready to jump on that ride.

Like someone I know I just heard say, when you're looking short, you're looking for the little kid in the corner of the room that always gets beat up, so you're going to watch for that acceleration really steepening, and you're going to go short there.

That's really the simple framework for what I use as a daytrader on just looking for direction, and I'm looking for the heavies so that I might follow the crowd instead of standing out on my own.

Do all three-the Bollinger Bands, the moving averages, and the Fibonacci levels-have to give you confirmation before you jump in, or are you willing to, say, take two out of three?

Good question. Sometimes they will contradict each other, so you have to make a decision at that point. 

What I try to do is make sure it's coming into an important level. Price is the most important thing. I think not a whole lot of people do this, but I count every single price; it doesn't matter if it went at ten shares or if it went at 10,000 shares, if it printed $50.03, it's on my charts, so I have all the data that I use.

When I take a look at that price, that's how my Fibonaccis are drawn, and when it comes into that price, then I look and say, "Alright, does it have support, and are my moving averages beneath to cradle?"

If I'm looking to short, is there resistance, is there a cover over the top that's acting like concrete, and if it's like that, then I'll just make sure that my Bollinger Bands are not saying, "Hey, we've got inflection ahead," and then I'll get in.

But it's mostly price first, then I want to watch to see if it's being cradled, and then I want to make sure that the Bollinger bands are not saying that it's time to reverse.

What about those times that you're sitting on the sidelines and not invested? What do you do then?

Wow, I'm studying about what to invest in next; what to buy next.

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