DAY TRADER · (day trad·er), noun - A person whose goal

is to make his or her profits from a security in the shortest

amount of time [preferably during a single day].

Keep in mind, the stock market is not your friend. Much like war, in daytrading and/or
short-term investing, you are pitting your wits against every other person in the market.
Every dollar you make is on the back of someone else's losses. Your goal is to win with
your investments and your trading and that requires someone else to lose - try to make
sure it's not you. Never forget that and you'll be off to a much better start in the markets.

How risky is daytrading? Well, before you read this page any further, imagine taking
about $10,000 in crisp, brand new one hundred dollars bills out into the back yard. Put
them on the ground and douse them in lighter fluid. Then strike a match. Don't burn your
money just yet, but just stand there.

That's about how risky.

Always remember: at any given time, when you are daytrading for a living, you are
risking probably that much money (if not quite a bit more) and your money is in perhaps
just as much risk. And while we are not suggesting that you actually set fire to your
money in the backyard, our analogy is fairly accurate. If that bothers you, then perhaps
you might consider another line of work, or a good mutual fund, because I don't know
any good day traders that haven't seen at least $10,000 go up in a puff of smoke during
market hours. It's simply unrealistic to expect to be able to trade professionally and
profitably from day one. Mistakes will be made; lessons will be learned; money will be
lost as you learn. It's a never ending process to a large degree. In fact, the day you feel
you have mastered the markets, that's the day you get your head handed to you.

In the years I have traded, I have seen many people come and go. I've seen people make
and lose large sums of money very quickly. I have made and lost large sums of money
very quickly! I've seen stocks go from pennies to hundreds of dollars and back again,
taking traders and investors for a ride both directions. And yet, still, in all the years I have
been in this business, I am sure of only one thing about the stock market: that I have not
seen it all yet.

If anyone claims to have all the answers about the stock market, or claims to be the only
person you should listen to - run, don't walk away from them and/or their services. While
we don't claim to know everything, our site and staff does have a tremendous amount of
combined experience when it comes to trading and investing. Our goal is to help educate
and provide a cost effective service that you can use along side your own trading. Are we
perfect? No. Certainly, not perfect. But I do feel DayTraders.com and our staff can do an
excellent job of helping traders profit in the markets while mitigating risk as much as
possible.
So, before going any further, put away the match and let us try to help you save a few
dollars on your daytrading education. In the following text we will try to impart some of
the knowledge we have acquired while day trading for a living. While these are not
always hard and fast rules that can be applied to every situation, we do feel that they are
helpful and represent a good starting point. In addition, we strongly suggest you closely
review our book list for additional reading material.

· DAYTRADING STRATEGIES ·

HOW MUCH CAPITAL DO YOU NEED? - This is a very common question and one we
receive quite often. By the same token, it's also somewhat difficult to answer. How much
do you really need in order to start day trading. How big a "stake" (a term used to refer to
your starting capital) is required to get going?

The only answer is that it's different for each person and it's something you must consider
for yourself before you start. However, I personally feel that, generally speaking, you
should have enough trading capital to purchase between 500 to 1000 shares of any given
stock. Ideally, without having to use margin.

So, if you are in the habit of trading $40 to $80 stocks, this could mean you need as much
as $40,000 to start. At the same time, one can trade with as little as $10,000 and get their
feet wet. It also doesn't hurt to have enough capital to diversify into several different
positions (two to five generally) at one time - each with say 300 to 500 shares. Just
remember, if you are starting small, keep your expectations realistic. Certainly, someone
trading with $10,000 to $20,000 is going to have a much more difficult time generating
$1,000 per day than someone using $100,000 or more. As long as you keep this in
perspective, it will help keep you grounded as you begin learning.

When you get into the bigger leagues of day trading, then it's nice to be able to "step on"
(i.e. purchase or short) a "block" or two of stock. This would be generally defined as
10,000 shares of stock. This typically is going to require $500,000 or more of trading
capital, plus some use of margin in limited situations and for a limited time. When you
reach this level, it's easy to see how daytrading can become quite profitable (and quite
risky!). A few points (or even a few fractions) across 10,000 shares can return quite a bit
of money quite rapidly. Just remember it goes both ways; you can quickly lose quite a bit
as well.

There's no right or wrong answer with regard to how much you need to start. Simply keep
your objectives in perspective and reasonable. This will go a long way to giving you a
good start in the markets. Also understand that if you are starting small, factoring in
things such as equipment fees and transaction costs may become much more important.
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REDUCING RISK AND PROTECTING CAPITAL - Reducing risk to your money

and protecting your trading capital must come before making money in the stock market;
it must always be put first in your mind when trading. You must learn and become
comfortable with this being your first priority when trading. I know that sounds a little
strange, but it's 100% true and a very important mind set to get into. After all, you can't
play the game if you don't have the dollars. You should always be willing to give up a
trade in order to reduce risk and save capital.

You absolutely must seek to reduce risk and protect yourself at every turn in the stock
market, even before making a profit. Don't get me wrong, you are here to make a profit,
but never at the expense of taking silly risks.

Always consider the risk to reward ratio of any trade you plan to take up. What is the
risk? What is the reward? Keep that ratio in your favor and you'll be well on your way to
making a good start in the trade and protecting your trading capital. I would rather miss
10 trades, than make 10 bad ones. Any trader would. Reduce risk, reduce risk! Bad
trades, mistakes, and large risks are like leaks in a dam. Forget about everything until you
correct the leaks, then worry about increasing the water level.

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GET YOUR FINANCIAL HOUSE IN ORDER FIRST - Trading and speculation in

stocks (more commonly called 'Daytrading') has been around as long as the stock market
has been in existence. Whether it's the days of the Buttonwood tree on Wall Street, or the
Bucket Shops of the 1920's, or the electronic trading that takes place every day across the
Internet, there are and there always will be "traders".

It's certainly not difficult to imagine that the first time a person bought a stock and saw it
go up, they had the urge to sell and take a quick profit. Daytrading is nothing new - it's
simply human nature to want to take a quick profit and then repeat the process.

Some people would like you to believe daytrading is something new and that therefore it
must somehow be "bad". However, when you really stop and think about it, daytrading is
really no more risky than any type of investing or financial speculation. Any investment
or trade can go bad, just like any trade or investment can go well. Just talk to anyone that
has owned large amounts of real estate for any extended period of time. There have been
times in the economy when interest rates sky rocketed and suddenly exposure to a large
mortgage has been quite risky. No matter what the situation, speculation with any
financial instrument brings some amount of risk - especially if done incorrectly or
unwisely. Daytrading is no different.

Certainly, daytrading, like anything else, can be risky if you don't know what you are
doing. I've known of people making one silly mistake and getting wiped out over night.
Since daytrading does come with a certain amount of risks, it's only wise to get your
financial "house" in order before you begin. As such, a few basic guidelines are in order.
First, we should understand that there are two basic categories of people that tend to seek
out daytrading and that these two categories are drastically different in their approachs to
the markets.

The first (and more historically typical) category is made up of people who are basically
pretty financially well off. These include individuals who have solid financial worth from
other means. They also tend to have homes which are paid for (or largely paid for) as
well as being relatively high net worth individuals, particularly in the liquid assets
category. For individuals in this category, daytrading most likely is only a small part of an
overall (and diversified) investment strategies or portfolio - and typically it's only used to
further an already solid net worth without exposing a high percentage of the individuals
assets to undo risks. Basically, these are individuals that can "afford" to do a little day
trading and typically don't go over board in "only" stock speculation.

The second (and not only more recent, but more dangerous) category tends to be people
who are attempting to build their net worth strictly from daytrading. These are individuals
who view daytrading not so much as simply one small aspect of an overall financial
investment landscape, but more as the major way to generate and build their entire
financial worth. This tends to also be the category of people who take larger risks and
sometimes generate a bit of negative press regarding daytrading. This negative press
would be along the lines of people that daytrade using funds from a credit card and/or
home equity mortgage of some form or another. When things don't go well in the
markets, typically the losses tend to have a more dramatic impact on the individual's net
worth and life style.

It's pretty clear that these are two radically different approaches to daytrading. If you are
in the first category, then as long as you do not expose more than around 10% to 20% of
your overall liquid net worth to stock speculation, you probably won't get into too much
trouble. However, if you fall into the second category - where you are trying to create
wealth through daytrading and/or you are using daytrading as your only means of
addressing stocks - then some guidelines are in order. Of course, at the end of the day, no
one can force you to follow these guidelines. However, if nothing else, you should
strongly consider the following information as it relates to your individual case.

First and foremost, you should never trade using money you cannot honestly afford to
lose should some catastrophic event wipe you out in the markets. These funds should be
largely similar to funds you would ear mark for Vegas or other forms of higher risk
speculation. In the event you lost these funds in total, they should not have any dramatic
impact on your life whatsoever. Generally speaking, these funds should represent no
more than 10% to 20% of your overall liquid net worth. Beyond this, you should strongly
take into account areas of your financial picture such as home ownership, outstanding
short and long term debts, as well as future responsibilities such as college for your kids,
etc. You should also take into consideration your age as it relates to your future
retirement. Daytrading at age 20 or 30 is one thing, daytrading your retirement funds at
age 65 or 70 is a whole different situation and very unwise unless you limit the amount of
funds at risk.
Again, before you undertake anything but causal daytrading, you should seriously
consider such things as paying down all of your short term debt. This would include
paying off all credit card balances and any loans which may be near maturity. You should
also consider allocating funds for and/or paying off longer term debts such as car notes
and/or home mortgages. Additionally, if you have a family to provide for, you should not
only consult with your wife, husband, etc. before attempting any sort of daytrading, but
you should take into account what impact large and unexpected losses could have on your
current as well as future living situation.

Generally speaking, unless you have tremendous earning power, you should have very
little debt and a stable housing situation before using much capital in the markets for day
trading.
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KNOW YOUR LIMITATIONS - What did Clint Eastwood say? "A man's got to know
his limitations" (of course, this goes for a woman as well). You've simply got to be
realistic about what you are capable of. I hate to say it, but some people are just not cut
out for trading. However, self evaluation can sometimes be very difficult. It kind of falls
into the category of "nobody thinks they are a bad driver". Obviously, if you didn't think
you were able to be successful at daytrading, then you probably wouldn't be reading this
page :-) However, just because you think you will be successful at trading, doesn't make
it so.

So for those of you that are unsure if you are cut out for it or have difficulty with self
evaluations, here's my sure fire way to determine if you are a good daytrader: look at
your bank account.

If your account goes up, then you are doing well. If it goes down, you are not doing well.
If in a couple of years you have more money than you started with (without adding more
funds), then you are off to a good start. If you have less, then you are making mistakes. If
in five or ten years you are consistently making money and/or have enter the big leagues
of trading, then you probably are cut out for it. If in five or ten years you are broke or
having to fund your trading from other profitable areas of your life, then you probably
aren't cut out for it. At the same time, you are only a failure if you quit. My philosophy
has always been never give up. If the person that became successful on the 20th attempt
had stopped at the 15th attempt, then they would have been a failure.

Daytrading can be a very hard road; you don't learn this stuff over night - it takes months,
even years to become even a half way decent and savvy trader. No one walks into this
business and learns it over night. It's like anything else in life - it takes time, it takes
practice and it take the ability to learn from your mistakes. If you find you tend to blame
your mistakes on everyone else - forget it - stop while you still have some money and get
a day job. I've never met a good trader that pointed a finger at someone else. At the end of
the day, no body forces you to enter the trade. No matter what advice you follow, what
service you use - the buck ultimately stops with you - as it's your decision to follow
through with the trade in the end. One thing you will never hear a successful trader say is
"I lost money, but it wasn't my fault". Every good trader I know takes full responsibility
for every trade they make and every action they take.

If you cannot say to yourself "I messed up that trade big time and I'll never make that
mistake again!" then you have selected the wrong business to be in. You simply have to
be able to stand back, look over what you are doing and honestly evaluate what is
working and what is not working. If something you are doing is not working, then you
must make changes. Trading is a highly fluid type of business, it's always changing and
you must adapt and change with it. What you must do, ultimately, is learn what works for
you - not what works for everyone else - what works for you. Part of that is knowing your
limitations.

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BE CONFIDENT IN YOUR TRADING - Taking up a position in a stock when you are

less than 100% confident is just a disaster waiting to happen. Being confident doesn't
mean being right. You can't always be right. However, based on the facts you have
available to you regarding the stock and/or company, you can be 100% confident that you
have done your homework based on what information you have available to you.
Anything less than this will tend to induce uncertainty into your trading. This will often
times undermine your confidence and ultimately your ability to stand firm when others
are selling.

By the same token, you must also be confident enough to exit a position when you realize
you have made a mistake in a trade. No one is suggesting you hold a stock that is in
trouble. Rather, you base your trading on facts, not fluctuations in the markets. Once you
have made your decision to buy or sell, if you are right, ultimately the markets will come
to you with a profit. Others may sell because they see someone next to them sell, but that
is not, and never has been, the road to success on Wall Street. Don't follow the crowd -
follow your brain, follow facts. Be confident in your trading and thinking and you will
generally (if you are smart and use all the facts at hand) come out on top a large
percentage of the time.

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HAVE A COMPLETE PLAN BEFORE ENTERING ANY TRADE - This is so

critical to successful trading, yet so rarely do I see people do it. Before you ever place a
trade, you must - absolutely must - have a plan of action for how you are going to handle
the trade. What price you are going to pay, what price you are going to sell at, how many
shares you will buy, what price you will cut your losses at, etc. This is critical. You must
have a strategy to handle not only the upside, but also the down side. The good and the
bad of the trade. Where will you sell the stock should it move up and what price will you
exit the trade should it move south. How long will you hold the stock if it doesn't move at
all? These are all questions that should be asked and answered before you purchase any
stock for a trade. This goes hand in hand with being 100% confident. You must have a
plan of attack.

Think of each stock you buy like a battle to be fought on the battle field. You are the 4
star General of the trade. Do you think a General would direct his troops onto the battle
field without a full plan of attack? Without thinking out every possible scenario or what
could go right or wrong? This is exactly how you must approach each trade you make.

Just as important: once you develop a plan, adhere to it. If the stock hits your sell price,
sell and move on; if the stock hits your stop, get out. Don't change your strategies
because of your emotions - change only because of additional facts which you did not
have when you formulated your plan, or if you clearly identify an error. Never change
your plan to try to justify your actions or justify the movement of the stock.

Remember the old saying: the market is always right. To be successful, you need to
understand the only mistakes that are made in trading are your own. As soon as you
identify a mistake, take action to correct it, not justify it.

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DIVERSIFY, DIVERSIFY, DIVERSIFY - Diversification, even in trading, is very

important for risk reduction. Since you aren't going to be correct in every trade you make,
diversification is necessary and important as a means to risk reduction and capital
preservation.

The simple fact is this: if you put all your trading capital in one or a very limited number
of stocks, you are just asking for trouble and increasing the risk you are exposing your
money to. At some point, if you trade long enough, you will undergo owning a stock that
drops like a rock for one reason or another. Most people who have traded for any length
of time have been there and it's no fun at all.

Avoiding putting all of your eggs in one basket is the first step in limiting risk when it
comes to both investing and trading.

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AVOID INVESTING TOO MUCH IN A POSITION - There is an old story on Wall

Street where one trader asks another trader for advice. He says, "I've bought so much of
this stock that I can't get any sleep at night... what should I do?" His friend says, "Reduce
your position in the stock down to the sleepling point. This is not only very good advice,
but very true. The smart trader takes up no position in such large quantities that it makes
him overly nervous or subjects him to loss of sleep.

Trade at levels which you can afford and you will generally feel much more comfortable
in your trading. This will generally result in much clearer thinking and smarter decisions
on your part. Too much risk will result in too much fear and that will cloud your thinking
and judgement.

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TRADE STOCKS YOU KNOW - Part of being confident about a position you take up
relates to having some understanding of the company behind the stock. Clearly it is
impossible to know every little detail about the day to day operation of every business
you buy stock in. However, it does help if you have a basic understanding of the type of
business they are in and how news (positive or negative) may relate to and/or impact a
company and their stock. This will not only help you feel more comfortable about the
position you take up, but it will allow you to more quickly evaluate news which may be
released regarding the company.

Trade stocks you know or that are in areas you may have experience in. Warren Buffett is
a good example of this philosophy. He has no problem telling share holders in his
investment companies that he doesn't understand much about technology related
companies and therefore steers clear of buying such stocks. Sticking to what you know is
not only a good way to start out investing and trading stocks, but it can help you feel
more confident and make better decisions along the way.

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TRADE POPULAR/LIQUID STOCKS - Stocks that are "popular" with the public and
investment community have a very real benefit to your trading - specifically, they tend to
be very liquid. Liquidity is a measure of how much volume changes hands on a specific
stock (typically on a daily basis). The more liquid the stock is (i.e. the more shares it
trades) the more likely you'll get a fair price when buying or selling the stock. Also, the
more likely it is that there will be a market to buy from or sell into.

Trading stocks which have very low volume (typically under 100,000 shares per day) can
incur additional costs and can limit your ability to get in and out quickly when so desired.
Often times if you try to buy or sell a large block of stock, there simply won't be a market
at current prices. This can result in the market "stepping away" from you when you go to
sell. Worse yet, you can drive the price up on yourself. While there are times when
buying a little known stock may work out, for most of your trading, you should strongly
consider sticking to actively traded stocks. This is true of options trading as well (i.e.
stick to options on stocks which trade higher volume).

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TRADE STOCKS THAT ARE MAKING MONEY - The stock market is based largely
on economics and business (with some emotion and perception thrown in). As a result, I
personally feel it's a good idea to trade stocks on companies which are currently showing
a profit, as opposed to companies which "might show a profit someday". Great ideas are a
dime a dozen, as they say, and you don't have to look far on Wall Street to find stock in
companies that are using other peoples' money to test out their "great" idea. In my
personal opinion, I would much rather be trading stocks in companies that are currently
profitable.

Additionally, keep in mind that even companies that are "making money" on the top line
may not be "profitable" from a net (bottom line) profit standpoint. There are many
companies out there that have racked up a tremendous amount of debt and/or have
business models that, while they bring in quite a bit of cash, are unable to actually show a
profit at the end of the year. Generally speaking, stocks which are currently showing a
profit or are very close and very likely to show a profit in the near term, trade better and
are somewhat less risky than stocks which are either in the red or struggling to show
profits on their financial statements. Part of this is because valuations are much easier to
calculate from real earnings (i.e. using the company's P/E ratio) than trying to base
valuations on "what might happen" down the road. True, sometimes stocks trade more
actively or more wildly on news of potential profits, but at the same time, when a
company announces they may not meet analysts' expectations or may experience an
earnings short fall, it can get quite dangerous. Consider sticking to companies with
tangible, consistent earnings when doing your trading as a further means to risk
reduction.

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AVOID BUYING THE "BIG EVENT" - This idea tends to go hand in hand with the
ideas presented above (regarding trading companies that actually are able to show a
profit). In the stock market, there is always "some big event" that might take place for a
company or the market. Buying or selling based on the possibility that this event may
take place (or may not take place) or based on the how the market might react to such an
event tends to turn your trading into a gamble more than anything else - and this is very
risky.

Buying a stock ahead of what might be a "big event" can be quite risky and often times
tends to delay your trading. Very often these big events (such as mergers, buyouts, etc.)
get delayed for months and months. If you wish to hold a stock for weeks and weeks or
months and months waiting for some big news flash, then that's perfectly okay. However,
just keep in mind that generally stocks move up on news far before the average individual
hears about even the rumor of the news. As a result, you often see stocks trade down on
positive news (due to the fact that the news was already anticipated long in advance and
largely priced into the stock prior to the release of the actual news). Generally speaking,
buying the big event will tend to be not only risky, but also will tend to slow down and
stagnate your trading. Avoid when possible.

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STOCK PRICES - Stock prices fall into two basic categories. Penny stocks (a.k.a.
stocks trading under $1.00) and pretty much everything else. To some degree, you can
lump stocks under $5.00 into the penny stock category as well, however, keep in mind
that this will not always be a fair representation.

Lower priced stocks have a very seductive allure. Not only can you buy large numbers of
shares, but when the stock does move, it typically moves in larger percentage steps.
However, that works both ways and there are additional risks with lower prices stocks
(typically they are lower volume and this can negatively impact your trading).

Personally, I feel much more comfortable trading a stock that is above $20 if at all
possible. Generally, stocks which carry low share prices tend to be more risky. They also
tend to be lower priced due to lack of interest from both the public as well as professional
investment community. This is not to suggest that there are not good quality low priced
stocks - certainly there are. However, especially when you are first beginning, we feel it's
best to avoid stocks which trade under $5.00 unless you really know what you are doing.
In the end, you usually stand about the same chance of seeing a higher priced stock move
10% as you would seeing a lower priced stock move 10%. Since this is usually (but not
always) the case, there tends to be a little more safety in trading in the higher dollar
stocks. Penny stocks can and do sometimes produce amazing short term gains, but unless
you really understand the risks associated with these lower priced and often more thinly
traded securities, we suggest you stick to more "name brand" stocks which tend to trade
at higher per share prices.

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GOLD, OIL, PRECIOUS METAL STOCKS, ETC. - Some people really enjoy
owning Gold stocks or stocks related to oil drilling or diamond mining. I personally do
not. Stocks of these types lack some of the inflation fighting components that traditional
businesses provide. As a general rule of thumb, if the stock doesn't produce a product or
provide a service, then it's generally best to limit your trading in them, at least in my
opinion. Stick to companies that produce a product or provide a service and you never
have to worry about hitting a "dry hole" or a sudden drop in the price of Gold or Silver.

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DON'T CHASE STOCKS - Stocks go up because people (usually large numbers of

people) are buying the stock. As a trader, this is usually not a good time to also be buying.
As such, be very cautious about buying stocks that are rapidly moving away from you.
The true money in stocks is made by buying stocks prior to a sudden move, not during a
sudden move. The one possible exception to this may be if there is some very positive
news that has caught the markets off guard and/or if the news is so outstanding that there
is a high probability that the stock may benefit for multiple days. Keeping in mind,
however, that a sudden move in a stock is often quite different than a change in the
overall trend. Sudden moves tend to reverse and if you get into the habit of chasing
stocks that are moving up, more times than not you'll end up paying overly high prices
and/or getting caught in a downward move shortly thereafter.
Again, generally people that buy late are buying on pure emotion (greed and fear). Greed
that they may make a lot of money very quickly and fear that they may miss out should
they not "get on board". Those are the two worst reasons to buy anything - not just stocks.
True you may miss out on the stock, however, in most all cases, it's better to wait and find
another stock, than to pay too much. Patience in the stock market is very important;
usually you'll do better by avoiding the temptation to "jump" when that impulse is largely
a result of a move in the share price alone.

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DON'T RUSH INTO ANY TRADE - This is along the lines of the above comment,
however it is worth elaborating on. Often times stocks will give you many chances to get
into them at current (or sometimes even lower) levels. Generally, there are few cases that
require sudden action if you are really careful in how you trade. Sometimes the best
trades are ones in which you wait patiently for the stock to come to you. If you feel the
need to rush to order a stock, that's sometimes (not always, but sometimes) a warning
sign that you are acting not on a well laid out plan for the trade, but an impulse to "get
into a trade" regardless of whether or not the stock is trading at what is really an ideal
price.

Keep in mind as well, it's often not a bad idea to take up positions in a trade little by little.
If you plan to own 1000 shares, consider buying 300 shares and then seeing how the
stock trades. Often times this will allow you to better judge the market and take
advantage of intraday weakness. If you do happen to miss purchasing the additional
shares, there is almost always another trade you can put the cash to work in.

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DON'T GET GREEDY - Two of the biggest emotions a trader has to over come are fear
and greed. Many traders fall victim to greed once they see a trade become profitable -
simply by not having a firm exit point in mind. It's generally best to decide at what levels
you wish to sell prior to entering into a trade to avoid this. If you feel yourself trying to
justify higher levels from the stock and/or ignoring the current profit "as though it were
nothing" you probably need to stop and consider not only the value of your profit, but the
current risk to it by holding longer.

Often times traders who are successful tend to lose respect for the actual value of a dollar.
Regardless of how much money you have, you must not lose sight of what each trade
produces and the value of the returns in relation to the capital used to produce those
gains. An example might be someone with several million dollars. If this person put
$10,000 into a position and saw it produce a gain of $2,000 they might not realize it's
time to take profits. While $2,000 is nothing when compared to several million, a 20%
gain should always sound alarm (i.e. sell) bells in a trader's head. In fact, typically a gain
of 10% or perhaps even as little as 5% should do this as well. A common method to help
combat this is to look at your trades strictly from a percentage standpoint of view, rather
than a dollar standpoint. This allows you to always calculate gains and losses with
consideration to the amount of capital at risk for any given trade.

In the movies, "greed is good", but in trading it's generally an emotion that does little
more than get in the way of clear and level headed thinking.

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CONTRARIAN THINKING - Generally, a trader should meet buying with selling and
vice versa when it comes to the stock market. Typically, stocks (especially when
considered on an intra-day basis) will only go so high, or so low, before tending to attract
the next group of contrarian thinkers and switch direction. Often times crowds (such as
the markets) are wrong in their actions and over react to the up or down side. When the
"markets" as a whole are moving up dramatically or down dramatically, there is a strong
case to be made that these actions ultimately will be wrong or will tend to reverse simply
as the contrary views of things builds on each side of the fence.

If you can train yourself to go against your natural emotions, you'll tend to be able to
keep a clearer outlook on the markets. When stocks are being bought, you have to train
yourself to think "These stocks are buying bid up too high - maybe I should sit back and
wait". By the same token, when there is a great deal of panic selling in the market, you
need to train yourself to think "Wow, look at all these prices falling - I may find good
deals here soon". It's more difficult than you think to be "happy" when the markets are
falling and "cautious" when the markets are raising. However, normally taking this view
of things will help improve your trading over the long haul. The old saying, "Buy when
there is blood in the streets" stems from this basic idea of going against the masses on
Wall Street.

--------------------------------------------------------------------------------

TRYING FOR TOPS AND BOTTOMS - People tend to have a desire to buy at the
bottom and sell at the top. Not just near the top, but the "exact" top. It's simply human
nature to want to be the best at something and trading is no different. Most people that
take up daytrading want to be the best they can be. However, aiming for exact tops and
bottoms when buying stocks can be very detrimental to your overall trading.

I would much rather give away 10% at the top and 10% at the bottom. You will drive
yourself crazy if you punish yourself for not selling at the high or buying at the low, as
it's almost impossible for most people to do on any sort of consistent basis. Far more
often than not, you'll simply end up missing the trade. Even missing a top or bottom by
20% is nothing to worry about. As many a successful trader has said, "you can worry
about the tops and bottoms and I'll worry about the remaining 60%". In fact, it's often
much safer to wait until a stock clearly signals a move either up or down before taking up
your position.

--------------------------------------------------------------------------------
STOPS - Some people use stop orders quite often, some people hardly use them at all. In
my view, stops are best used to protect a nice profit and/or limit down side risk in a trade
that isn't acting as you think it should. How a stop is used (or placed) is largely dependant
on the individual stock and how the overall market is behaving at any given time as well.

Often times using stops also helps to remove some of the emotions from trading. It's far
easier to place a stop on a trade than watch it trade tick-by-tick and try to decide the exact
moment to get out.

--------------------------------------------------------------------------------

TAKING PROFITS ON BIG GAINS - At some point, just like experiencing a large
loss, you are likely to hit a really big winner. When this happens, consider taking 1/2 your
gains off the table right away to reduce risk to the profit you have just made. This allows
you to continue to profit, but protects a large amount of the money you have just made.
Additionally, you may wish to consider selling enough of the position to recoup your
original investment. This results in the remaining shares effectively being "free" and
allows you to hold them indefinitely without any fear of a "loss" to your original capital
(which has now been removed completely).

--------------------------------------------------------------------------------

SHORTING STOCKS - When shorting stocks, there are several points to always keep
in mind. Never short a stock simply based on the stock price. To really be successful as a
short player (i.e. someone that shorts stocks), you need to locate stocks which are
extended with a significant void of fundamental reasons. There must be some reason for
the stock to decline in the near term (e.g. declining profits, lack of direction, etc.). Simply
shorting a stock "because it has a high share price" is just inviting danger.

Additionally, keep in mind that shorting stocks exposes you to additional risks which are
not present when buying or going "long" a stock. These include having the stock called
away from you, as well as being caught in a short squeeze. Also keep in mind that the
very act of shorting a stock increases the pent up demand for the stock - namely the
number of people that will ultimately have to repurchase the security down the road to
cover.

Finally, a good rule of thumb is to never short a stock which may end up on the front
page of the Wall Street Journal or some other major financial publication. Typically, the
best short candidates are stocks which have moved up rapidly on little or not fundamental
changes and which are generally not well know to the investment public at large. While
it's true you can make money shorting well known, large cap stocks, it tends to expose
you to additional risks not associated with smaller and less well known companies.

--------------------------------------------------------------------------------
PLACING ORDERS FOR STOCKS - Buying stocks appears fairly straight forward at
first glance, however there are several points you should consider before blindly placing
your first trade to buy or sell a stock. Following is a brief outline of points to consider:

First and foremost, you need to understand that stocks are sold to you at one price and
bought back at a slightly lower price. This difference is called "the spread". And while the
spread has generally decreased over the years, you are still taking a hit when you
purchase a stock (assuming you should want to turn around and sell right away). The bid
price is the price the market will pay for a stock when you go to sell it, while the ask
price is the price quoted to those who wish to purchase the stock from the market.
Nothing says you cannot try to buy at the bid and sell at the ask, but this will generally
delay your execution.

On the topic of bid and ask prices, you should note that there is a corresponding "size"
which relates to how deep the orders run on the bid and/or ask size at any given price. As
an example, you may have 100 people trying to buy a stock at a specific price, while only
10 are trying to sell. This directly impacts how much stock is available at any given bid
or ask price. Once the orders to buy or sell a stock at a given price are filled and/or
cancelled, the price adjusts according to the remaining orders - either at higher or lower
prices. If there is a 'void' of orders at any given level in the market, a stock is said to "free
fall" or "gap" to where ever there are buyers or sellers. Keep in mind as well, how this
area of pricing is handled is sometimes dependent on where your stock trades. On the
NYSE, for example, bid and ask sizes are displayed by a market specialist who's job it is
to ensure an orderly market. However, on the Nasdaq, multiple market makers my line up
at different prices advertising to the market to buy or sell at different levels. Detailed
information regarding where a specific market maker (generally a large brokerage firm)
will buy or sell a given stock is provided via Level II data.

Next, you should understand there are several different types of orders that can be placed
to buy or sell a stock. The most common is called a "market order". This means buy or
sell at the market price. However, keep in mind once this type of order is placed, you are
nearly powerless in your control of the price paid should the market make a sudden
move. In a very active market, you can also run into situations where your confirmation
(showing the price you paid for the stock) is delayed significantly. This makes it
extremely difficult to judge what a "fair and accurate" price is and/or when your order
should have been executed. It also opens you up to possible foul play when it comes to
how your order is processed and/or handled. As such, unless you are dealing with a fairly
orderly market, we suggest using what are called limit order.

A limit order works just like you might think. It is an order with a limit price attached to
its execution. When you place your order, you specify a limit to the price you'll pay.
While limit orders are usually executed after market orders, they do provide a higher
level of protection against over paying, etc. Additionally, we feel they are a fine method
to use when trying to take up a position at a lower than the market price. You should keep
in mind, however, there are two types of limit orders. A stop limit as well as a market
limit. A stop limit order is an order which becomes a stop (such as a stop loss) once the
price is reached. Keep in mind with this sort of order, the market can pass right by you,
where as with a normal limit order (which basically turns into a market order once hit)
you stand a better chance for not only execution, but seeing an improvement on your
execution price (this is because once your market order is set, the market may move in
your favor during execution, but you will never pay more than your limit).

Limit, stop and market orders apply directly to both buying and selling of stocks.

--------------------------------------------------------------------------------

STAYING ON THE SIDELINES - Sometimes being in cash gives you the best strategic
position from which to trade - and this is often an overlooked fact of daytrading.
Remember, you can't take advantage of market dips if you are already in the market! In
my view, it's better to be out of the market more for day trading than in the market. This
will allow you to get in and out with profits quickly and be on the sidelines should dips
occur. It also drastically reduces the risk to your capital as compared to just sitting in
stocks that aren't moving and/or holding trades for excessively long periods of time. Try
to be out of the market more with your trades and in the market more with your
investments (as long as they are good investments of course).

--------------------------------------------------------------------------------

ABOVE ALL ELSE - One of the most important and most widely over looked aspects
of being a successful day trader is working on your personal life and how you conduct
yourself. Most of the personality traits required to be a successful trader are also the traits
found in someone that is said to have Character.

Rarely have I met a successful trader that I didn't like. I've found - almost without fault -
that people who are successful at the stock market are also fairly successful at "life".
These are people that show integrity in their lives, as well as consideration and honesty.
They are people that deal with others in a generally polite and honest manner. As
mentioned above, rarely have I run into a successful trader that will "point a finger" or
blame others for their mistakes. Integrity, honor, character, fairness - these are all
qualities that not only make up general character in a person, but also are the foundation
of a successful trader.

I've often said, if you aren't naturally "humble" that the stock market will do an excellent
job of teaching you how to be :-) Always keep in mind that the stock market is nothing
more than dealings between human beings - it's just people doing business. And how this
business is done is a reflection of all involved, as well as you yourself.

To be successful in the market, you must start by getting your house in order when it
comes to yourself and how you deal with other people. If you are a dishonest person, or
you blame others for your own mistakes or have a lack of integrity in your character,
chances are high than this will come back to haunt you in the end - not only in life, but in
the stock market.
Discipline, fairness and honesty - those are all traits I have found in successful people and
above and beyond all else, successful traders. My simple words of advice to people
entering the stock market are these: "Take stock of yourself, before you take stock from
anyone else"

:-)

Ray Johns
Senior Market Editor
DayTraders.com

http://www.traderji.com/trading-technicals/15069-day-trading-
strategies.html
DIFFERENT TRADING STRATEGIES :-

We can categorize or divide our strategies as per different time frames &
situations for better understanding.

1. MORNING 30-MINUTES STRATEGY.

2. TRADES AFTER MORNING TRADES.
3. TRADES DURING QUARTERLY RESULTS.
4. GAP OPENINGS OF MARKET.

* MORNING 30-MINUTES STRATEGY *

This strategy is based on understanding the moves of the BROKER.

( sentiments )
If you track the Close price you will wonder the Open price of the trade day
is not always the same as that of the previous days Close price. It is because
the major brokers (BIG TRADERS) according to the sentiments lay a trap in
which small traders get trapped and run into losses. If we understand the
brokers mind we can make profits 90 % times in normal market in the first 3
to 30 minutes of trading.( Remember you should close your positions in this
time frame )

Take the following figures and trade plan with you on the basis of
calculations given below. We will call it Brokers Strategy ( BS )

Difference between HIGH & LOW of previous day i.e.: D = ( H – L )

Now BS = D / 3

BUY PRICE = ( Pr. Close – BS )

SELL PRICE = ( Pr. Close + BS )

For understanding the BS one should understand the following……..

STRONG SHARE or STRONG CLOSE (close price is higher than previous
close) &
WEAK SHARE or WEAK CLOSE ( close price is lower than previous close
)
Now on the basis of above calculations you are ready with the figures i.e.:
BUY PRICE, Pr. CLOSE & SELL PRICE of STRONG SHARE & WEAK
SHARE separately.

Now on trade day if STRONG share opens anywhere between Pr. Close &
BUY PRICE you can BUY first & keep for sell @ SELL PRICE as your
target.
The Trap :- As the broker opens the share at a price lower than Pr. Close one
gets the feeling as if the share has become weak and sells it, thus falling in
the trap.

On trade day if WEAK share opens at or above SELL PRICE you can SELL
first & buy later @ BUY PRICE as your target.
The Trap :- As the broker opens the share at a higher price than the Pr. Close
one gets the feeling that the share has become strong and buys it thus falling
in the trap.

Note: For this strategy Preferably take shares with high volumes & less
volatility(not operator driven stocks). This strategy will not work in GAP
OPENINGS. This strategy requires you to be very fast in taking decisions
and accordingly positions. Furthermore One should compulsorily come out
or close the position in the mentioned time frame. Life is not that easy and if
you find that your position was wrong immediately square it ( close it)
REMEMBER TO CLOSE POSITION WITHIN THE TIME-FRAME
MENTIONED

POST 1:-
STRATEGIES ( FORMULAE ) FOR INTRADAY TRADING
by………..intradaySuRe.

The intraday movements of share prices are generally governed by Support

& Resistance levels. The intraday volume, OPEN, HIGH, LOW, CLOSE &
previous CLOSE prices are very important & one should track these prices
daily. Previous data of 3 to 5 days is what is to be maintained or tracked.
And the intraday data prior to the trading day is important.

OPEN ( O ) : The opening price for the particular day.

HIGH ( H ) : The highest price for the particular day.
LOW ( L ) : The lowest price for the particular day.
CLOSE ( C ) : The closing price for the particular day.

We can calculate the support & resistance levels for the next trading day
with the help of above prices. The basic formula to calculate the various
support(S1,S2,S3) & resistance ( R1,R2,R3 ) levels is as follows :-

Support & Resistance Levels

R3 = H + 2 * ( B – L )

R2 = B + ( H – L ) or B + ( R1 – S1 )

R1 = ( B * 2 ) – L

BASE = B = ( H + L + C ) / 3

S1 = ( B * 2 ) - H

S2 = B – ( H – L ) or B – ( R1 – S1 )

S3 = L – { 2 * ( H – B ) }

Mostly traders’ worldwide use above formula of Support & Resistance both
for intraday trading as well as Delivery based trading. The general intraday
interpretation of these levels (also called as PIVOT POINTS ) is if the Share
price(or market) is above the BASE one should take a Long ( i.e. Buy )
position with target of exiting (Selling) at R1, R2, R3 levels. Similarly if the
Share price (or market ) is below the BASE one should take a Short ( i.e.
Sell ) position with the target of exiting ( Buying ) at S1, S2, S3 levels.

YOU have to understand one more important aspect of these levels. As the
price moves from one level to other the immediate lower level becomes
support & immediate upper level becomes resistance. Suppose the price is
above R1 than R1 becomes immediate support & R2 becomes immediate
resistance of the price movement.

Before understanding the different Strategies, we will take a look at the

results of a very long term study of more than 10 yrs.

Actual LOW is lower than S1.......... 43 % times.

Actual HIGH is higher than R1......... 43 % times.

Actual LOW is lower than S2......... 17 % times.

Actual HIGH is higher than R2......... 17 % times.

Actual LOW is lower than S3......... 3 % times.

Actual HIGH is higher than R3........ 3 % times.

Now just apply your mind to interpret the findings of above study to help
you decide ENTRY & EXIT points for your BUY or SELL positions.

THIS FORMS THE BASIS OF YOUR UNDERSTANDING THE

MARKET & INTERPRETTING IT BETTER & ALSO GRASPING MY
DIFFERENT STRATEGIES.

POWER OF 3 :-
As a trader always remember 3 is a very important number.
3 sec., 3 min., 3 hrs, 3 days, 3 months , 30 % etc. and so on.

Some basics for a novice trader :

Intraday as the term itself is self explanatory is the position you take and
clear on the same trading day.
As a general understanding of trading people feel that they have to first buy
something to sell it later at profit.
But in intraday trading you can SELL a share even if you don’t have it with
you. This is termed as SHORT SELL. i.e.: You sell suppose 100 XYZ share
@ Rs. 250 , here if the price comes down to say 220 and you buy back the
100 XYZ shares. Your transaction is complete. 250-220=30. And
30*100=3000 Rs is your profit.
i.e.: Short sell is exactly opposite of the buy first and sell later transaction.
SHORT SELL transaction has to be compulsorily completed by buying back
the equivalent no. of shares on the same trading day.

General but IMPORTANT for all :

REMEMBER INTRADAY TRADING IS A MINDGAME. There are many
strategies one can apply to make profits daily in intraday trading as per my
experience, observations & understanding. These strategies have been
categorized or you can say designed on the basis of different TRADE
TIMES, SITUATIONS, MARKETS, & SHARES. As discussed Mostly
traders worldwide use above formula of Support & Resistance both for
intraday trading as well as Delivery based trading short term & long term.
So my advice would be to refer the support & resistance levels along with
the various recommended strategies by me.
Although one can apply different strategies for different trades, I would
suggest traders to select one strategy, which they are comfortable with, as
per the mindset, personality & risk taking capacity.( i.e.: either BUYING
strategy or SHORT SELLING strategy. A simple reason is that you cannot
be two persons at one time, or you cannot have two views at a time.) Once
you master one strategy, you can practice another and apply. YOU can also
make profits forever by sticking to one strategy forever.
A little study or homework is compulsory to be successful and self
sufficient, independent trader.

DIFFERENT TRADING STRATEGIES :-

We can categorize or divide our strategies as per different time frames &
situations for better understanding.

1. MORNING 30-MINUTES STRATEGY.

2. TRADES AFTER MORNING TRADES.
3. TRADES DURING QUARTERLY RESULTS.
4. GAP OPENINGS OF MARKET.

* MORNING 30-MINUTES STRATEGY *

This strategy is based on understanding the moves of the BROKER.

( sentiments )
If you track the Close price you will wonder the Open price of the trade day
is not always the same as that of the previous days Close price. It is because
the major brokers (BIG TRADERS) according to the sentiments lay a trap in
which small traders get trapped and run into losses. If we understand the
brokers mind we can make profits 90 % times in normal market in the first 3
to 30 minutes of trading.( Remember you should close your positions in this
time frame )

Take the following figures and trade plan with you on the basis of
calculations given below. We will call it Brokers Strategy ( BS )

Difference between HIGH & LOW of previous day i.e.: D = ( H – L )

Now BS = D / 3

BUY PRICE = ( Pr. Close – BS )

SELL PRICE = ( Pr. Close + BS )

For understanding the BS one should understand the following……..

STRONG SHARE or STRONG CLOSE (close price is higher than previous
close) &
WEAK SHARE or WEAK CLOSE ( close price is lower than previous close
)
Now on the basis of above calculations you are ready with the figures i.e.:
BUY PRICE, Pr. CLOSE & SELL PRICE of STRONG SHARE & WEAK
SHARE separately.

Now on trade day if STRONG share opens anywhere between Pr. Close &
BUY PRICE you can BUY first & keep for sell @ SELL PRICE as your
target.
The Trap :- As the broker opens the share at a price lower than Pr. Close one
gets the feeling as if the share has become weak and sells it, thus falling in
the trap.

On trade day if WEAK share opens at or above SELL PRICE you can SELL
first & buy later @ BUY PRICE as your target.
The Trap :- As the broker opens the share at a higher price than the Pr. Close
one gets the feeling that the share has become strong and buys it thus falling
in the trap.

This strategy requires you to be very fast in taking decisions and accordingly
positions. Furthermore One should compulsorily come out or close the
position in the mentioned time frame. Life is not that easy and if you find
that your position was wrong immediately square it ( close it)

Note :- The BUY PRICE as per above calculation is approximately S1

& The SELL PRICE as per above calculation is approximately R1
Querries solution
Thankyou for the responses.
Dear friends I suggest please read every thing mentioned in the post. All
strategies are based on intraday time frames & previous day movements of
share price. Remember one thing all good & and bad news are reflected in
price movements & trading psychology.
These strategies do not really require any software, what they require is a
little study of price movements of 3 days. Based on the previous movements
one should be able to predict(understand) the probable movements that may
happen on trade day.
Please paper-trade for few days to get the feel of it.
I am clarifying certain things as desired.
1)Suppose TRADE date is 27 june. So you should have figures of 26, 25 &
24 june ie.3 days.
{open,high,low,close & volume of 26 june} & {close of 25 june(pr.close)}
will give figures of probable movements for trade day ie. 27 june.
For morning 30 min. strategy no need of stop loss as you have to
immediately cut your position if it is not favouring you. Remember in
intraday if you have a mentality that every position you take will give
profits- PLEASE DO NOT DO INTRADAY TRADING. Because first you
will have to work on your mentality(trading psychology). Sorry to be harsh,
but truth is always harsh.

2) The 10 yr study data mentioned is to guide you in taking your decisions

for entry & exit for both BUY or SHORT SELL positions. for example
Actual HIGH is higher than R3 3 % times.
INTERPRETATION- a)If you have bought at base, R1,R2, it is high time
you exit your long position of intraday(or at least keep a trailing Stop-loss).
b) It is highly risky to enter with a buy position above R3
C) It may be safe to take a short-sell postion above R3 if the share is
showing some reversal with SL above the reversal price. Immediately bring
down your trailing SL in profitable area if you have got the winning
position.

Similarly you can now interpret other findings of the study.

PLEASE REMEMBER GREED & FEAR ARE THE GREATEST

ENEMIES OF DAY TRADERS.
IT IS NOT MONEY BUT THE SKILL & TRADING PSYCHOLOGY YOU
HAVE TO ACQUIRE - because money will follow once you master the two.
Bye

POST 2:-
* Some more morning strategies :……………….

A ) SHORT SELL :- ( sell first & buy later )

OPEN & HIGH IS SAME….

Sell just below HIGH price if it is not breaking the high price for 3 minutes.

Example : If O-H is 110 sell @ 109 with a SL ( stop loss ) just above HIGH.
Best results are observed if :-
a) Market is Bearish ( weak )
b) O-H rate is near or above SELL PRICE i.e.: ( pr. Close + BS )
c) O-H rate is @ or near R1, R2, R3
d) Share price has gained 10-30% in previous 1-3 trade days.
e) Weak share but O-H rate is @ or near R1, R2, R3

B ) BUYING :- ( buy first & sell later )

1. OPEN & LOW IS SAME……..

Buy just above LOW price if it is not breaking the low price for 3 minutes.
Example : If O-L is 100 buy @ 101 with SL ( stop loss ) just below LOW.
Best results are observed if :-
a) Market is Bullish ( strong )
b) Pr. Close is Strong ( i.e.: it is a strong share )
c) O-L is near or below Pr. Close
d) O-L rate is near or below BUY price or @ S1, S2, S3

2. STRONG SHARE :- ( i.e.: strong close pr. day )

BUY if :-…………..
a) OPEN is @ BUY price.
b) OPEN is same as pr. Close.
c) OPEN & LOW is same, as discussed above.
d) OPEN is just above pr. Close but far below SELL price.
Best results if market is bullish. Keep the target of getting out @ SELL
price, or @ R1, R2, R3 if it is showing strength & volume is more than pr.
Day.

PLEASE REMEMBER : 1) AS A INTRADAY TRADER YOU SHOULD

NOT FIGHT WITH THE MARKET. BE READY TO ACCEPT A SMALL
DEFEAT RATHER THAN MAKING IT A BIG FAILURE.
2) IT IS NOT A EASY GAME. UNDERSTAND IT . ALWAYS ANALISE
SUCCESS & FAILURE FOR EVERY POSITION YOU TAKE.
3) Select a strategy. Do the homework before trading for that strategy only.
Don't mix other strategy with it. PAPER-TRADE.for few days sincerely(the
more time you take the better)......than start with small qty. for a period of
say a month(do not overtrade your limits).......once your success for your
strategy is 70-80%.........than increase qty in steps again. .....DO NOT OVER
RISK.......YOU CANNOT CHANGE THE MARKET ....ALL YOU CAN
CHANGE IS YOURSELF......TOWARDS SUCCESS.
4) Once you get the feel of price movements , how and why they
happen....then YOU may take additional guidance of any softwares (NOT
MANDATORY)
5) YOU CAN MAKE MONEY BY STICKING TO ONE STRATEGY
FOREVER ALSO.......NEWER FORGET THIS.........SO.......JUST KEEP A
AIM TO MASTER ONE STRATEGY.......AND LOOK FOR
OPPORTUNITIES ....FULFILLING THE CRITERIA OF YOUR
STRATEGY

WISH YOU ACQUIRE THE TRADING PSYCHE