Successful day trader shares how he came up with his best day trading strategy, what it is, and how he trades it.
I, Cory Mitchell, am joined today by trader, Marcello Arrambide. In 2013, after trading for nearly a decade, I was introduced to Marcello and the Day Trading Academy (DTA), and there wasn’t a whole lot I thought I could learn. I was wrong. Marcello and his crew take trading to another level, both in terms of how they psychologically approach the market, their strategies, how they form expectations about market movement and ultimately how they implement getting into and out of trades.
What I liked is that their approach is based on simple concepts that build on each other. While they trade other markets, they primarily focus on trading E-mini S&P 500 futures (ES). Their main tool is the “Congressive” trading method.
I should point out that this method is NOT static. It is not just buying on green lights or selling on red lights. Marcello and his crew teach traders how to adapt and alter the strategy to changing market conditions, filter trades, and move beyond the basic strategy to attain consistent day-in-and-day-out performance. This “adapting” is hard work. It is not for everyone because it means you are constantly analyzing new information as it comes available…which can be a bit exhausting. I do the same thing when I trade, so I know how much mental energy it takes. But it is possible to be successful at it, and I believe it is the most consistent way to trade.
Most new traders want something simple…like buying when the price touches a moving average. Well…trading isn’t that easy. Trading takes a lot of work and constant adaptation, and this method is no exception. It won’t work right out of the box; the trader always need to apply some subjectivity, and that means results will vary from trader to trader, significantly. We get out what we put in.
The Congressive course costs a few thousand dollars. This is mostly due to the one-on-one coaching provided with the course. If you are looking for a solid trading method and mentoring, this course may be a fit for you.
I recently asked Marcello about his day trading strategy. This interview was originally conducted in 2015, and based on more recent discussions some new material has been added in.
Cory: Marcello, I know you and the DTA trade more than just futures, but your focus is on trading futures…why is that? For those unfamiliar with the E-mini S&P 500 could you tell us a little bit about it, and why you tell new traders to focus on them first?
Marcello: Thanks for the interview Cory, it’s always a pleasure to talk with other traders. I actually started my trading career with Russell 2000 futures over 12 years ago, before it moved to the ICE Exchange. That is when I was introduced to the E-mini S&P 500. The futures markets have several advantages over other markets, and the barriers to entry are minimal as well.
Stocks, for example, require a lot of homework, such as screening (going through lists of stocks to see what has volume and what is moving) and stocks also have a huge barrier to entry because of the pattern day trading rule (PDT). The PDT rule states a trader needs at least $25,000 in order to day trade. With the E-mini S&P 500 you can start day trading with as little as $1,000 (although starting with $2000 or $3000+ is recommended).
With that amount of money, our traders at the Day Trading Academy are able to average $50 to $100 a day.
Also, since futures are a “speculators market” there are no restrictions for shorting like there are in the stock market.
The last–and probably most important thing– is that the E-mini S&P 500 (ES) is the most heavily traded market in the world for professional day traders. Forex is the largest market in the world, but the ES is a great day trading market for new and professional traders alike. This means that while there is good movement and volatility, it is easier for beginners to learn how to trade.
Cory: The Congressive strategy is your main day trading strategy, yet it is quite simply and doesn’t use a lot of indicators (it does use a couple). Can you explain your approach when coming up with the strategy? What did you want out of it, and what problems did you want to eliminate that you may have found with other day trading strategies?
Marcello: Most of the day trading industry is predicated on great sales techniques and fancy programs. The truth is that day trading is quite boring. It isn’t about using specific indicators or software with every color of the rainbow. Indicators and software are based on “lagging” price action; they re-arrange price action and then show us what the price did in the past.
The concept behind the Congressive Trading Strategy was to keep things simple and be able to adapt to the market as it changes. Congressive stands for conservative and aggressive put together. By not paying attention to indicators and software we are able to pay attention to what is important, the market [which is price action]. We are able to adapt and make money when the market isn’t moving well by being conservative, and being aggressive when the market is moving very well and trending. We call it structure-based trading rather than rule-based trading. We are able to teach people how to actually understand what the market is doing rather than masking it with indicators and software.
We wanted to make the process as simple as possible to learn and also allow people to trade the way they feel comfortable. There isn’t a “best day trading strategy” that will suit everyone. Everyone is different; some are more aggressive or conservative than others. By being able to understand the market and keeping it simple everyone is able to trade and make money the way that they feel comfortable. That’s the best day trading strategy for them…but it’s not exactly the same for everyone.
Ultimately, we want people to be able to trade whether the market is trending, ranging, volatile or sedate.
I have included a couple of my past charts, showing the ability to adapt whether the market is ranging or trending. I picked these examples because one day was trending but had rather smooth movements, while the other day had ranging and erratic movements. These days both ended up being quite profitable. That won’t always happen. Every method has losing days as well. [Note: I have not traded ES futures for some time, as I swing and day trade stocks and currencies instead. These charts are from back in my ES days, and my charts are setup how many DTA traders have them.] My swing trades or stock/currency day trades typically follow the same idea.
Looking at these charts you will all see things you likely would have done differently. But in real-time we can only base our decisions on our own perceptions and analysis at that exact moment. This is going to vary by person, based on what they practice and their psychological makeup. Thus, even though we are trading the same strategy, we could end up taking different trades, or getting in or out at slightly different places.
January 14, 2015. More Rangey Day.
Some traders advocate implementing a strategy the exact same every time: once a stop or target is set don’t touch it, for example. This is a very strict rule-based approach. You teach trading based on “guidelines,” which allows traders some flexibility in using the strategy during different market environments. Why do you advocate this approach, and what are the advantages over the strict rule-based model?
Everyone leans toward rule-based trading because they think it is going to be easier to learn that way. That in some respects has merit, but in other ways, it can cause a lot of harm in a trader’s development. The problem is the market doesn’t always move the same way. It changes rapidly and the same “rules” may not work in tomorrow’s market.
The idea behind having a structure/guidelines, rather than strict rules, is that we are able to adapt to what the market is doing. We can also rely on ourselves rather than companies that sell indicators and software. We don’t need to pay for more software licenses or be afraid a signal service is going to go out of business. By understanding what the market is doing, we have confidence we can adapt and continue to be profitable.
Following a strict set of rules won’t allow us to change if the market changes. Another major problem is that most people aren’t able to feel comfortable because they have to follow someone else’s rules. [Cory: I used the DTA core concepts and combined them with methods I was already using, and how I like to trade.] Most of us are different; what we like to eat, how we like to dress, where we like to hang out, etc. It wouldn’t be smart to have everyone learn how to trade the same exact way. Instead of having one guru that teaches everyone the way he trades we have an army of traders that have different styles and risk tolerances. Our Master Traders, as we call them, help to continue developing the strategy and also help all of our traders. By understanding what the market is doing and pairing everyone with a Master Trader that has the same style (and/or personality as you) you have a much higher probability of success.
I agree. My own methods are guideline based. This leaves a bit of subjectivity in the strategy, which means that even though me and hundreds of readers may be using the same strategies, we won’t end taking the exact same trades. And that is a good thing! Yet, if we all practice hard on how we EACH implement the method, we can still all be profitble.
Anything else you’d like to add about trading or the day trading strategy you use?
I think one of the most important things is that the strategy is always changing. Many people ask me before they join the program if the strategy will be obsolete after so many people start using it. I always respond that since we base our decisions on market structure and behavior our decisions are always adapting to what the market is doing. That is precisely what we teach everyone: how to adapt and continue making consistent profits from the market.
Another thing that makes us different is that we are in the process of launching our own hedge fund to give our traders the ability to trade investor funded accounts. We believe in our strategy so much that we actually put our money where our mouth is: we fund traders. This is also part of the learning process as many traders actually get better as they continue to teach and help the newer traders in the program. It is a never ending process because at the end of the day… trading for us is a lifestyle, it isn’t a profession.
Can potential day traders see your trading strategy in action, for free? If they want to learn more, where can they find out more about day trading futures and what the DTA has to offer?
Since we are now opening day trading centers around the world we have our program in Spanish, English, and Portuguese. We have live classes every week where one of our Master Traders talks about the market, live.
We often have a free live class open to the public on Wednesdays where I specifically talk about how we look at the market and provide live market analysis.
In the training program we provide support with daily market recaps showing all the valid trades (based on the basic strategy; as traders progress they exercise freedom in taking addition trades or avoiding trades), personalized critiques and feedback to help traders improve their skill, and everyone has access to our unique community of Master Traders.
Visit our website at TheDayTradingAcademy.com to get a bit more insight into what we do and how we do it.
Editors note: I think that the DTA’s main day trading strategy is a good one, as I trade in a very similar way. But this isn’t really a strategy, it is more a way of analyzing and seeing the market. That means it will take a lot work to master.
As Marcello points out there is no best day trading strategy which will work for everyone, because what works for one person may not be right for another. The basic DTA strategy is a good foundation, but if you follow signals blindly you have missed the point. The point is to take the foundational concepts and make them your own. You need to practice how you will implement the core concepts–and when you get it, you will have your own version of the best day trading strategy.
By Cory Mitchell, CMT