How I Trade Stocks For a Living -- [Chapter 12]

CHAPTER 12:  "The Overnite Daytrade" For Day Traders
While not part of The Beanieville System, the "Overnite Daytrade" can be
useful (especially on the SPY) and is a trade we place within the last few
minutes before market close, at the close, or a little bit after hours.  The
trade, long or short, is based on how oversold or overbought the stock is (as
well as the recent chart of the stock) and we fade (go opposite) the
condition. However, it is not something you necessarily have to trade on; it
can be used as an indicator what to expect for the general market the next
morning.  Factors such as the general market as well as what's happening
afterhours are also considered. The goal is to sell for a profit if we get it. We
sell either before the close, after hours, premarket the next day, the morning session of the next day, or by the close of the next day, ​but I generally sell the next morning​.  Since it is a day trade it should not be held past the close of the next session.   ​To determine the trade, I use the 1 minute chart and the all important MACD.  If it closes way above the center 0 line, chance of a fade the next morning is high.  If you set up the MACD, there usually are bars in the center as well.  I use the lines and the bars when observing.  When in doubt, go with the bars.  I go with the bars in most instances.  A minute before the close, or at the close itself, or slightly afterhours is when I usually make my trade.  Watch the MACD bars. 

You can see them very easily on the Ameritrade platform.  I also like to watch
the 50dayMA on the 1-minute chart as well.  If the stock closes slightly
above that moving average, it tends to gap higher the next morning.  Also
note the slope of the 50dayMA; If it appears to be turning down, a gap down
is likely.  Put all these pieces together and see if you want to play the
overnites.  Of course, the more pieces align the more likely you will be right
on the direction of the gap.
There are exceptions where the fade will fail - like aggressive very large
volume runup from a bottom or aggressive selloff from a top into the closing
bell.  But these don't happen too frequently.  Regardless, the amount of
times it fails is insignificant compared to all the times the Overnite
Daytrades will work.  It works especially well in a sideways market.
The SPY etf is especially suitable for the overnight plays.  However, it
doesn't mean you need to actually make a play.  This play is certainly not for
everybody.  Lots of times, I just sit on my hands and let it tell me how the
market will likely react the next morning.  Maybe I might do something in
premarket the next morning.    
So combine the Overnite Daytrades with The Beanieville System, you sell
your existing position/business when you think it will gap down the following
day, and you buy it back in the morning.  If, however, you think it gaps up
the following day you can buy an extra position and sell that portion on the
following day's gap up. 
Those who use The Beanieville System should consider making SPY your
core holding/trading, especially if you have a large portfolio. SPY will never
go bankrupt on you and will always have trading volume. Add the Overnite
Daytrades to your toolbox, and, along with the morning gap fades, you can
absolutely make a living trading the stock market for the rest of your life.
The SPY is for you, especially in these uncertain times. Why waste time
worrying about individual stocks that could become the next Enron?  The
SPY should also be considered in severe recessions like the one we're in
right now, where many stocks will be obliterated and only a few might come
back in the next bull market.  Going with Buffett stocks or going with the
SPY will get you through severe times and still allow you to generate BVIs
without worrying your stocks (businesses) imploding and never to come
The Overnite Daytrades are high probability trades (especially on the SPY)
when the setup is good, as it should be because the successful rate is
somewhere north of 80%. One could get an average of 1 point profit move
on the "overnite daytrades". You got 5 days in a week, and 4 weeks in the
month. A trader can potentially generate 20 points per month on the trades. With the ​SPY​ at $85, the yield is near 25%. That is a "potential" 25% gain on your money per month.  Let me see, if you make 25% per month on the SPY overnites and you compound your money, within a year, what do you get?  Using the Rule of 72, you get about 1,500% return.

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