So, now we have the computer, the software, connections to a reliable database and to a brokerage house, and the data come in. First, a watch list containing "good" high potential stocks must be constructed. We now observe on our screen how the price values of the stocks contained in our watch list(s) change. We click on a chart from time to time to see how price behaves in terms of absolute values and in relation to our "best" selected technical indicators. When "buy" or "sell" signals occur, we act.

In pre-market surveys, recommending stocks on the basis of after-the-market actions, in my personal opinion, such "predictions" most frequently are false, because the next morning already brings critical changes to after-market price levels.

Price action in the morning from the opening bell to about one hour into the day (Central Time in Houston 8:30 to 9:30 am) frequently is stormy; positions occupied or ordered during the night and from many parts of the world will be equalized by the major market players. This may cause great and sudden price changes. If one is in possession of a stock that runs up during the first hour of the news day, one may sell at its peak. If price drops considerably in the early morning, one may wait for price to turn back up. To order a stock in pre-market time (prior to 8:30 am in Houston) is not recommended as one will get a late price (5 -15 minutes into the market), and markets may already behave different from the predictions made before market opening

After about 9:30 CT am, about one hour into the day, the market "settles". Now one can apply trading rules as follows:

Hold a stock as long as price is above a selected moving average (say, MA20) and this moving average line goes up.
Buy a stock when price crosses upward across a select moving average (say, MA20), and when this MA begins to turn up.
Sell a stock when price dips underneath a selected moving average (say, MA20), and when this moving average signal begins to dip.

Medium-long stochastics (5.3, 7.3) and MACDs (12-20-8) are quite helpful to control price movements.

Of great importance is the behavior of volume of the market in general and of a particular stock. In the TCNet program, money flow or TSV ("Time-Segmented Volume") is an indicator that combines price and volume: When one plots a TSV signal (17, or shorter) over the price curve, the relative position of the TSV signal line versus price indicates what volume and price development is to occur. Often there is a time delay between TSV signal and price action of variable dimension; it may be a few to 20 minutes or more in intra-day actions. Price will always follow the TSV signal motions. Shorter TSV signals (3 to 6 or so) will add some useful "warning"-time, but they contain some signal noise. TSV signals longer than about 20 do not add any useful effect.

Important is to select stocks in the "right" position of the price cycles. For short cycles I use short stochastics like 2.1/2 and 2.2/2, also 5.3/3 and check stocks on daily charts. These signals should not exceed values of about 65 in order to have 2-3 days until their specific turn-over points (assuming a price cycle of 3-6 days). It is advantageous to check signal cycle behavior in the past, say, 3 months on the same stocks; stochastics may stay over 70 for a while.

Now to the "stock picking":

Ideally all "good" stocks from a watch list created the night before should increase in price. This will not happen. On days when markets trend strongly up, the success rate of stocks rising in price may be 70-90%, on negative-market trend days 30-50%. How then does one find the "right" stock at the "right" moment?

This is one of the greatest problems in intra-day trading. Here are some solutions:

One can constantly click on stocks to see on their chart price developments occurring. This is not very high-tech and somewhat tiring, also one may be too late for the "best" price position.
One can observe sorted portions of watch lists, especially when they that are being sorted for volume or price change, then one can click on potential stocks (available in TCNet)
One can join the chorus of chat participants (in TCNet) and observe their recommended stocks. This approach is not very successful, given the generally low experience level of chat participants; one could even fall for cases of fraud (purposely wrong stock recommendations).
One can use price alert modules contained in the major software programs. This is not very successful, as one seldom catches the critical relations between price and indicator signals in time and price position.
One can use alert systems indicating pre-defined price/indicator relations, such as given by the AMIBROKER program and apparently by the OMEGA program. This seems to be the most promising direction of intra-day trading

It is interesting to speculate here a little on the future of intra-day trading, especially of automatic or automated trading systems. One can foresee further increases of market volatility and perhaps a general trend that further separates traders from investors. Market volatility most likely will increase, and stock price movements may be even less related to market news or to changes in fundamental company finances than before. But here - let's go ahead and start day-trading!

I personally, during a trading day

use watch lists of previously selected stocks,
watch the sorted listings (volume and price % change) in TCNet,
may listen in to some chat of people one finally learns to know as reliable and experienced.
click on any chart I like to see.

Thus, in a general sense, intra-day trading quickly turns into a time-consuming and much involved activity that one cannot treat as secondary or minor.

I personally do not, during a trading day,

follow pre-market reports,
follow stock recommendations from chats or from any TV or guru source, including those found in magazines and newspapers. What is published is too late.

In summary we may say that a carefully prepared and carefully operating individual can well participate in intra-day trading that should result in financial gains. It is not play but serious work. One will be well advised to do some "paper trading" in the beginning, that is theoretical trading on a piece of paper without investing of (own!) money. Only when experience is obtained should money be used for the real thing.

We should also mention the great theoretical and practical assistance every one interested in stock or fund trading can obtain from several Special Interest Groups (SIG) and their meetings under the HAL-PC umbrella in Houston.

J.C.("Chris") Pratsch has been active in computer-based intra-day trading for over a year. He started investing and trading of stocks and funds in 1966. He can be contacted at jcp@hal-pc.org.