Things to Master If You Want To Be a Day Trader

**Falcon_1** · 07-24-2009 11:06 AM

Things to Master If You Want To Be a Day Trader

I look at Day Trading as to being dedicated to job. If you do it part time, chances are you will lose because you don�t have full control during your absence from monitoring your investments. My basic philosophy to day-trading is the following list of guidelines. Many people play what I call �I hope� stocks. They rely on other people�s opinions on a stock and buy without doing any due diligence, hoping they make them profits. �I hope � I hope � I make money.� It usually becomes frustrating when success is not gained and then they blame the tipster for their loss. Sorry, it�s your fault! Give your best effort to protect your investments through knowledge and education.

RULE #1- Don�t believe what you hear � only what you have validated through your Due Diligence. There are many people out there smarter than you � and they want your money!

1) Due Diligence- Investigate the company first before you invest.
Ask yourself:
a. What future does the company�s product have?
b. Is this a company that I want to invest in?
c. How well financed is it?
d. Visit the company�s website. Educate yourself.
Call their �Investor Relations� and ask questions.
e. Are the insiders holding a lot of shares and have they bought
or sold off recently?
f. What are the past 6 month record highs and lows? Look at
the charts!!!
g. Daily volume average � little volume � risky � large volume
� more security on your decision to buy or sell.
h. Check out past News � News � News and more News and
� Investigate � Investigate and Investigate. Would you buy
a business without knowing as much as possible about it?

2) Set news alerts for all stocks you are invested in with as
many sites as you can. The reason is some sites get news
before others. Being ahead of the game is key.

3) Learn to read charts and understand what they mean �
Bollinger Bands � Candlesticks � Parabolic SAR � MACD
� Momentum � RSI � Chaikins Volitility � Level 2 etc.
StockHideOUT tutorials are excellent! Study them!
Video and Text Chart Lessons - Stock Hideout

4) Day trading takes dedication and close monitoring � minute
by minute. Those who are successful are on the market watch
from before the market opens until way past close. Then they are
looking for more opportunities after hours and doing due diligence
on potential stocks.

5) Beware of RUMORS. They can be a death trap for a stock
purchase. There are many people out there who pump up stocks
for their own benefit. If a stock is being �PUMPED� by someone,
get validation and justification (LINK) for the pump before you buy
long or short!

6) Greed will kill a portfolio. Set a realistic goal on a stock and when it
hits it � GET OUT! Protect your profits and profits
are sustained this way. Remember � what goes up � will
eventually drop and not everything that drops will go back up!!!

7) In your portfolio have long term and short term positions. LONG
TERM STOCKS grow gradually and are the foundation of a portfolio.
SHORT TERM STOCKS are risky and can make you a lot of profit in
a short period � daily and weekly. WARNING � short
term positions have to be monitored closely � sometimes minute
by minute. It�s your money so protect it!

8) Don�t invest all your funds. Keep some funds in reserve because
there may be a stock that has great news and is ready to
accelerate. No funds available � missed opportunity for profit!

9) Watch the BID x ASK price spreads. The tighter the spread the
less volatile the stock.

10) This is not a game. Look at it from the perspective that playing the
market is a profession. It is risky and the profits and losses are in
our own control.

Good Luck and Happy Day Trading!!

Falcon_1

**chuck44l** · 07-24-2009 11:35 AM

Falcon Excellent post As most know i am a daytrder by heart here is more info that i have put together in the past.

Below is some information that i found and borrowed from various sites.

What exactly is day trading?
Day trading means short-term trading. Positions are closed prior to the end of the day and no contracts are held overnight. Day traders are simply executing their trading decisions in a tiny time frame.

Why Daytrade? Many trader friends ask me why I daytrade; the real-time data feed is expensive, slippage and commissions are a considerable expense relative to position trading expenses, and it requires an intense focus. My response is that if you�re good at daytrading, the returns can be much greater because you can trade several times a day rather than once a week or once a month.

What To Expect When Day Trading?
Day trading can be hard, all of the successful day traders i know blew out their account at least once before becoming consistently profitable online trading on an annual basis. (Or monthly, or weekly, depending on their goals and online trading style). These "bits" are not meant to make you a conservative or hesitant day trader. On the contrary, day trading takes guts, and by following these "bits of wisdom" you are being given the key that will allow you to embrace risk and take the necessary chances required in the pursuit of capital gain. That is, you will feel more compelled to take a chance, because you know you are also going to fight to protect your capital. You won't freeze and lie helpless as it is whittled away.
Day trading is the greatest business in the world. By following the bits of day trading wisdom below we hope that you can stay in this business as long as you choose.

40 Day Trading Tips
Day trading is simple, but it ain't easy. If you want to stay in this business, leave "hope" at the door and stick to your stops.
When you get into a day trade, start looking for signs right away that you are wrong. If you see them, then get out before your stop is hit.
Day trading should be boring, like factory work. If there is one guarantee in trading, it is that "thrill seekers" get their accounts ground into parking meter money.
Amateur day traders turn into professional online traders when they stop looking for the "next great technical indicator" and start controlling their risk on each trade.
You are trading other traders, not the actual stock. You have to be aware of the psychology and emotions behind online trading.
Be very aware of your own emotions. Irrational behavior is every day trader's downfall. If you are yelling at your computer screen, imploring your stocks to move in your direction, you have to ask yourself, "Is this rational?" Ease in. Ease out. Keep your stops. No yelling.
Watch yourself if you get too excited - excitement increases risk because it clouds judgment.
8. Don't overtrade - be patient and wait for 3-5 good trades.
If you come into day trading with the idea of making - big money,you are doomed. This mindset is responsible for most accounts being blown out.
10. Don't focus on the money. Focus on executing day trades well. If you are getting in and out of day trades rationally, the money will take care of itself.

If you focus on the money, you will start to impose your will upon the market in order to meet your financial needs. There is only one outcome to this scenario: you will hand over all of your money to day traders who are focused on protecting their risk and letting their winners run.
The best way to minimize risk is to not trade. This is especially true during the low-volume -chop and slop- found during the afternoon online trading session between 11:30AM Eastern and 2:30PM Eastern. If your stocks are not acting right, then don't trade them. Just sit and watch them and try to learn something. By doing this you are being proactive in reducing your risk and protecting your capital.
There is no need to trade 5 days per week. Day trade 4 days per week and you will be sharper during the actual time you are trading.
14. Refuse to damage your capital. This means sticking to your stops and sometimes staying out of the market.
Stay relaxed. Place a trade and set a stop. If you get stopped out, who really cares? You are doing your job. You are actively protecting your capital. Professional day traders actively take small losses. Amateurs resort to hope and sometimes prayer to save their trade. In life, hope is a powerful and positive thing. In executing an online trade, hope is a virus that can infect and destroy.
Be right on day one or get out. Don't take a red position home overnight.
17. Keep winners as long as they are moving your way. Let the stock market take you out on a trailed stop.
Money management is the secret to success. Don't overweight your trades. The more you overweight a day trade, the more hope comes into play when it goes against you. Hope is to online trading as acid is to skin. The longer you leave it in place, the more painful the outcome will be.
There is no logical reason to hesitate in taking a stop. Reentry is only a commission away.
Professional traders take losses. Being wrong and not taking a loss does damage to your wallet, mind, and soul.
Once you take a loss you forget about the trade and move on. Especially if it is a small one. Do yourself a favor and take advantage of any opportunity to clear your head by taking a small loss.
You should never let one position go against you by more than 2% of your account equity. This means if you have a $50,000 online trading account, you should never let one stock turn into a loss of more than $1,000. This means if you max out your 2 to 1 margin account and buy 2000 shares of a $50 stock, you must have a stop loss of 50 cents. That is tight and bound to get hit. Do yourself a favor and buy 400 shares of this $50 stock and use a $2.00 stop to start. That is only an $800 dollar loss and gives you room to trail your stop up to break-even before you are taken out on a wiggle. Is there ever a time when it is okay to take more than a 2% portfolio loss on a position? NO! Never means exactly that. This is a maximum loss by the way. Setting up your plays for losses of 1% of your equity is even better of day trading.
Use daily charts to get an idea of the 30-day trend, hourly charts to get an idea of the 1-day trend, and 5-minute charts to establish your entry points while day trading.
If you are hesitating to take a position, that indicates a lack of confidence that is not necessary. Just get into the position and PLACE A STOP. Day Traders lose money in positions everyday. Keep them small. The confidence you need is not in whether or not you are right, the confidence you need is in knowing you will stick to your stop no matter what. Therefore you can actually alleviate this hesitancy to pull the trigger by continually sticking to your stops and reinforcing this behavior.
Averaging down on a position is like a sinking ship deliberately taking on more water.
Build up to a full position as it goes your way.
Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
Look for opportunities NOT to trade.
You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional day traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of failed breakouts).
Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying a decline by saying things like, "They are just shaking out weak hands here," or "The market makers are just dropping the bid here," then you are embracing your opinion. Don't hang onto a loser. You can always get back in.
Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground. If you find yourself saying things like, "My stock in EXDS is still a good investment," then it is time to start following the basic principals all professional day traders follow. (That would be protecting your capital, aggressively cutting your losses, and letting your profits run by not giving in to the temptation to sell just because you have a quarter profit).
Siphoning out your day trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don't day trade.
Professional day traders only place a small portion of their assets into 1 position. Or if they take on a large position, then they strictly limit their risk to 1-2% of their current equity. Amateurs typically place a large portion of their assets into 1 position, and they give it "room to move" in case they are actually right. This type of situation creates emotions that ruin accounts, while professionals day traders are able to make decisions and cut losses because they strictly define their risk while day trading.
Professional day traders focus on limiting risk and protecting capital. Amateur traders focus on how much money they can make on each trade. Professionals day traders always take money away from amateurs traders.
In the stock market, heroes get crushed. Averaging down on a losing position is a "heroic move" that is akin to Superman taking a spoonful of Kryptonite. The stock market is not about blind courage. It is about finesse. Don't be a hero.
36. Sadly, day traders never learn the importance of "the rules" until they have blown their account out of the water. Until you "lose it all" it never seems that important to have to follow the basics of professional day trading. (Cut your losses, let your profits run, etc).
The stock market reinforces bad habits. If early on you held onto a loser that went against you by 20%, and you were able to get out for break-even, you are doomed. The market has reinforced a bad habit. The next time you let a stock go against you by 20%, you will hang on because you have been taught that you can get out for break-even if you just be patient and hang on long enough. Tell that to the folks who while online trading bought VERT at $145. When is it going to get back to break-even? Well, if your timeframe is never, then you have nothing to worry about. Control your risk by sticking to your stops.
This next bit is brutal, but true. The true mark of an amateur day trader who is never going to make it in this business is one who continually blames everything but his or herself for the outcome of a bad trade. This includes, but is not limited to, saying things like:
The analysts are crooks.
The market makers were fishing for stops.
I was on the phone and it collapsed on me.
My neighbor gave me a bad tip.
The message boards caused this one to pump and dump.
The specialists are playing games.
The mark of a professional, however, sounds like this:

It is my fault. I traded this position too large for my account size.

It is my fault. I didn't stick to my own risk parameters.
It is my fault. I allowed my emotions to dictate my day trading.
It is my fault. I was not disciplined in my trades.
It is my fault. I knew there was a risk in holding this trade into earnings, and I didn't fully comprehend them when I took this trade.
The obvious difference in day trading is accountability. For amateurs, everything having to do with the market is "outside their control." That is not reasonable thinking, and really just points to an individual who has, probably for the first time, had to confront their "real self" as opposed to the perfect self or idealized self they have constructed in their mind. This is also known as "living in a fog." A person can drift around through life in their own private world, where they are pretty special and can do no wrong. Unfortunately, online trading rips off this mask, because you cannot dispute what has happened to your trading account. This is also known as "confronting reality." For many people, when they start trading they are suddenly confronting reality for the first time in their lives. Just to see the world as it really is requires a lifetime of training, and for many people trading the stock market is their first real step in this journey. Some people say that traders are born, not made. Not so. If you choose to see the world as it is, then you can start trading successfully tomorrow.

Amateur online trading traders always think, "How much money can I make on this trade!" Professional traders always think, "How much money can I lose on this trade?" The trader who controls his or her risk takes money from the trader whose head is in the clouds.
At some point day traders realize that no one can tell you exactly what is going to happen next in the market, and that you can never know how much you are going to make on a day trade. Thus the only thing left to do is to determine how much risk you are willing to take in day trading in order to find out if you are right or not. The key to trading success in day trading is to focus on how much money is at risk, not how much you can make.

This is what the SEC has to say about day Trading.

Day Trading: Your Dollars at Risk

Day Trading:
Your Dollars at Risk
Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage, but running the risk of higher losses too.

While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.

Here are some of the facts that every investor should know about day trading:

Be prepared to suffer severe financial losses

Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it's clear: day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.

Day traders do not "invest"

Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Day trading is an extremely stressful and expensive full-time job

Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even.

Day traders depend heavily on borrowing money or buying stocks on margin

Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads.

Don't believe claims of easy profits

Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.

Watch out for "hot tips" and "expert advice" from newsletters and websites catering to day traders

Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee. Once again, don't believe any claims that trumpet the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations.

Remember that "educational" seminars, classes, and books about day trading may not be objective

Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading.

Check out day trading firms with your state securities regulator

Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator and at the same time ask if the firm has a record of problems with regulators or their customers. You can find the telephone number for your state securities regulator in the government section of your phone book or by calling the North American Securities Administrators Association at . NASAA also provides this information on its website at NASAA.

**Stock_Analyzer** · 07-24-2009 09:56 PM

Great post here Falcon...we really appreciate you posting and sharing these thoughts with us and with newer members.

Originally Posted by Falcon_1

Things to Master If You Want To Be a Day Trader

I look at Day Trading as to being dedicated to job. If you do it part time, chances are you will lose because you don�t have full control during your absence from monitoring your investments. My basic philosophy to day-trading is the following list of guidelines. Many people play what I call �I hope� stocks. They rely on other people�s opinions on a stock and buy without doing any due diligence, hoping they make them profits. �I hope � I hope � I make money.� It usually becomes frustrating when success is not gained and then they blame the tipster for their loss. Sorry, it�s your fault! Give your best effort to protect your investments through knowledge and education.

RULE #1- Don�t believe what you hear � only what you have validated through your Due Diligence. There are many people out there smarter than you � and they want your money!

1) Due Diligence- Investigate the company first before you invest.
Ask yourself:
a. What future does the company�s product have?
b. Is this a company that I want to invest in?
c. How well financed is it?
d. Visit the company�s website. Educate yourself.
Call their �Investor Relations� and ask questions.
e. Are the insiders holding a lot of shares and have they bought
or sold off recently?
f. What are the past 6 month record highs and lows? Look at
the charts!!!
g. Daily volume average � little volume � risky � large volume
� more security on your decision to buy or sell.
h. Check out past News � News � News and more News and
� Investigate � Investigate and Investigate. Would you buy
a business without knowing as much as possible about it?

2) Set news alerts for all stocks you are invested in with as
many sites as you can. The reason is some sites get news
before others. Being ahead of the game is key.

3) Learn to read charts and understand what they mean �
Bollinger Bands � Candlesticks � Parabolic SAR � MACD
� Momentum � RSI � Chaikins Volitility � Level 2 etc.
StockHideOUT tutorials are excellent! Study them!
Video and Text Chart Lessons - Stock Hideout

4) Day trading takes dedication and close monitoring � minute
by minute. Those who are successful are on the market watch
from before the market opens until way past close. Then they are
looking for more opportunities after hours and doing due diligence
on potential stocks.

5) Beware of RUMORS. They can be a death trap for a stock
purchase. There are many people out there who pump up stocks
for their own benefit. If a stock is being �PUMPED� by someone,
get validation and justification (LINK) for the pump before you buy
long or short!

6) Greed will kill a portfolio. Set a realistic goal on a stock and when it
hits it � GET OUT! Protect your profits and profits
are sustained this way. Remember � what goes up � will
eventually drop and not everything that drops will go back up!!!

7) In your portfolio have long term and short term positions. LONG
TERM STOCKS grow gradually and are the foundation of a portfolio.
SHORT TERM STOCKS are risky and can make you a lot of profit in
a short period � daily and weekly. WARNING � short
term positions have to be monitored closely � sometimes minute
by minute. It�s your money so protect it!

8) Don�t invest all your funds. Keep some funds in reserve because
there may be a stock that has great news and is ready to
accelerate. No funds available � missed opportunity for profit!

9) Watch the BID x ASK price spreads. The tighter the spread the
less volatile the stock.

10) This is not a game. Look at it from the perspective that playing the
market is a profession. It is risky and the profits and losses are in
our own control.

Good Luck and Happy Day Trading!!

Falcon_1

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