9 Things You Need to Know to Day Trade

Day Trading Basics

Day trading is a growing field today as technology and treading tools advance, many people are interested in the glamour that this career holds. If you are interested in day trading, it is important to understand the different day trading strategies so that you can effectively trade stocks. There is a fine art to this occupation, and learning how to do it the right way can make or break your day trading career. Much money can be made in this activity, it is crucial that you implement the right day trading strategies.

Generally, there are two types of day traders, the trader that works for a bank or financial institution, and the trader that works independently. Obviously, as an independent day trader, you are subject to a higher degree of risk since you are not backed by a bank or other financial institution, you also will need to supply your own trading software, which can run in the range of a few thousand to many thousands of dollars. If you are interested in trading stocks, day trading can be a great way to start.


To be a day trader, you have a variety of tools available to you. These traders are constantly watching the market trends every minute the market is open, and analyzing how to make the most money, while balancing risks each day.


For day trading, as a retail day trader, you must follow all necessary regulations. As the stock market is regulated by ,FINRA, which is the Federal Industry Regulatory Authority, with the extreme risk that day trading exposes you to, it is necessary to properly understand these regulations. To understand the regulations you must first understand what a day trade is. If you fall under the definition it is crucial to follow the regulations.


Day trading, or swing trading, is defined as buying and selling the same stock during the same day. This will include any pre-market hours, during market hours, and after-market hours sales. If this occurs in one trading day, it is a day trade. Anything that falls outside of this is not a day trade and is not subjected to the same regulations. Be sure to carefully follow the regulations that exist for day trading.


9 Things You Need to Know to Day Trade
When you are day trading, it is very important that you know and understand the market. By having a solid grasp on the market, and knowing how the stocks you are looking at perform, you will be able to ensure that you are making the most of your day trading. Since there is a high risk in this investment portal, you don't want to get involved if you don't truly understand how it works, and you need to know the best trading strategies. These strategies are what are proven to make you the money you want.

Day Trade Penny Stocks

Penny stocks have the option to make the highest gain, with very high percentage yields in a very short amount of time. A penny stock is defined as any stock on the market that is $5 or less a share. Penny stocks are generally how day traders make the majority of their money, and with a penny stock you can limit what you are liable to lose.


Do Your Research


As with any venture you want to embark on, it is very important to have properly researched the market and the stocks that you are interested in. If you do not do proper research, you are risking losing your money and or your client’s money. Fundamental and Technical analysis are the two primary ways to research markets. It is best to learn as much as you can about both of these.


Be Prepared to Be Stressed


If day trading was easy, everyone would do it. With risk comes stress, and you must prepare yourself for the stress. The stock market in general is stressful, think about current investments you have, how upset do you get when they lose value? You’ll be dealing with this on a daily basis, get used to it! Practice good anti stress techniques to make sure that you are level headed.


Do NOT Depend on Luck


The stock market is not the casino; it is not a luck based game. It is not a game in general, but if you think you are going to slide in their and make money based off of a good guess, you are wrong. It may work once, and get your hopes up, and then you will lose more than you ever imagined. Luck and the stock market does not mix, follow what the research tells you.


Be Careful of your Emotion


If you’re sitting on at your computer yelling at one of your 5 screens, there is an issue. Emotion, good or bad can cause a cloud in judgment. If you do well, and let your emotion get the best of you, you may make a bad decision and invest in something you don’t want to. Or, if you are doing badly with one particular stock, your emotions may tell you to pull everything else. Don’t let this get the best of you. Emotions can cost you so much money, beware of them.


Don’t Burn Yourself Out


One of the earlier bullet points explained that day trading is stressful, in order to be successful, you don’t want to burn yourself out. Instead of doing trading five days a week, look into four days, you can probably make just as much money if you plan it out right, and you’ll be able to sit back and relax. Don’t succumb to the pressure of online day trading by working too much. Four days a week will still provide you with a good living if it is done right.


Know When to Take a Loss – Be Smart With Your Money


Part of being a smart day trader is knowing when to take a loss. If you are losing money, it may be time to pull out for the day. Set risk reward parameters prior to entering any trade. These ratios are normally 4-1 risk reward ratio, whereas, if u risk $1 you try and make $4. It is important to use your stop-loss to prevent losing more money than you really need too. Proper planning with technical trading will prevent this.


Put Your Profits Elsewhere


A smart gambler always knows how much they are up, and doesn’t spend that portion. You’re not a gambler, but you should follow the same philosophy. Every month, take your profits and move them away from the account that you use to buy and sell stocks. Invest this money in a money market, a savings account, or a CD. These are all low risk options. You’ll still have the money you always had, but your profits will be safely tucked away for a rainy day.


Never Focus on What you can Earn, Focus on What you can Lose


By understanding how much is at risk, you become a better trader. If you are constantly thinking about how much money you can make, you may make a bad decision. Always knowing how much money you can lose will keep you on your toes, and keep you mindful. Don’t count your money before you’ve made it, limit your losses, and the money will follow. Trade the Market - Don't Trade the Money.






Stock Trading – Types of Orders


To make the most of your money, there are certain orders you can place for your stocks. By following the Stock Trading – Types of Orders, you can limit the amount of money that potentially could be lost at any one time. It is important to understand the stock trading – types of orders and know what you can do with your shares. Orders through the computer will help your daily selling


The first type of order is a limit order. With most online software, this is the default type of order. You can either set a limit for what you want to buy the stock at, or what you want to sell the stock at. Once you’ve reached that limit in either case, the activity will be completed for you, preventing a loss.

A market order is also known as a not held order. These orders execute at a specific time, they do not have any limitations as to the amount of money the stock is currently up or down. This is a risky strategy and one that most people should not try; it will not bring in the best returns.

A stop loss order sets an upper and lower limit for your stock. It will automatically open or close a market position by buying or selling a stock at that point. For people that aren’t active with their accounts this is great. For day traders you can set a stop loss point, and once it gets to that point it will sell, you don’t have to watch it every second. If the 30 day trend is telling you it hasn’t gone past $4 a share, you may set a stop loss at $3.50 to sell, knowing that is the best you will get.


A trailing stop is a smart order; it will adjust the order based on the changes in the market price. As the market increases, the trailing stop increases also. So, if your prediction was off, and it went far above what you predicted, with a trailing stop it will keep setting limit as the stock increases in value. That way, if it starts going back down, your trailing stop will kick in and help you make the most money.

A market on close order or MOC is very easy to understand. You may want to set your day trades to do this at the end of the day if you don’t get to them. Of course, since this simply tied to the market closing, you never know what your profits will be with an option like this. However, if you truly day trade, it will get rid of the stocks you didn’t at the end of the day.

Knowing the different orders you can place will help you become a quality day trader. Using online software can provide you will many benefits that will increase your productivity and hopefully your profitability. By truly understanding how the orders work, you’ll be able to place them on your stocks.

Since day traders make a lot of buys and sells on a daily basis, it is important to use technology to get the most out of it. If you get overwhelmed, the technology can help carry you through. By setting the right technologies to the right stock, you will never have to worry about your emotions getting the best of you. You’ll always have a set plan for your stocks.
Using Technology for Day Trading

There is a lot of technology that will increase your ability to day trade, since this is such a fast moving, demanding industry; you need to have the latest technology to make the most out of your trading. The products for this industry are always changing; stay on top to have the best.

Many websites help narrow down stocks into a niche and wind up doing the work for you. Depending what you are looking for, these websites have a variety of inputs you can manipulate to get what you want, and the answers you need. Generally, you will see the ticker symbol, the name of the company and other examples of stock choices and how they behaved historically, a track record if you will. From there, you can see the other facts about the stock, and what the price and change has been.


Another great tool depending on the service you use for your online stock is a heat map. It generally does just what it says. The heat map breaks up stocks by their sector. It assigns them their area on that portion of the map depending on how much of the market share they own. Then, it assigns them a color. Red is bad, it means that they are losing money. Green means that they are gaining. As they decrease from green to red, the profit margin shrinks. This is a great visual tool to have for your day trading.


Aside from these tools, you also need to have the right equipment. It is important to have a very good office setup wherever you are. Day trading requires multiple monitors with multiple screens that hold the data. As you are trading, you can flip between screens so you never miss anything. Day traders also need quality computers that move quickly, and a great internet connection speed. You don’t want to be caught with improper tools, just another way to lose money, be prepared, it helps.


Day Trading Risks

Many people are ready to speak out about the risks of day trading and already do. The U.S Securities and Exchange Commission has posted multiple warnings on the dangers of day trading. It is important to understand these before you jump into a career that involves day trading. A lot of money is at risk to be gained or lost.


Day traders often suffer financial losses in their first few months, and you need to be prepared for that. Some never make money. As with gambling, only risk money you can afford to lose. You don’t want to use money that you would generally use the pay the bills, dip from your retirement, or take out a second mortgage on the house, you’re just asking to lose money that you don’t have.


It is also important to remember that you can be fooled. As a day trader, just because you see a “hot tip” on a website or the “Stock of the Day”, it may not be that. Don’t get trapped into false advertisement, and depend on what you see. Before you purchase a stock, you want to make sure that you have personally done the research to understand the investment that you are making, this way, if you lose money; you know that you did everything you could to succeed.

Rewards of Day Trading


Day trading isn’t just a scary game, there are ways to make lots of money and be very successful. Day trading has become a career for many Americans or a successful hobby when they retire. If you have the funds to start out day trading, you can potentially make a lot of money. By using money that you are ok losing, you’ll have the stress off of you and hopefully be able to make some profit.


Being a day trader has many rewards. If you are within the profit margin, you have a lot of wiggle room. You can work a four day work week, giving you more time to travel and enjoy your family. You can also work from any location, an office, your basement, in a hotel room in Italy, wherever you have internet, computers, and a cell phone. The flexibility of this career makes a lot of people take interest in it.


Starting with even just a one percent profit margin each day, a day trader can turn that into money. Some day traders make upwards of $200,000 a year, but these people are far the majority. Your average day trader at home is probably making around $30,000, this may not be enough to live off of, but would be a great supplemental income. There are ways to make money even from home being a day trader; it just takes a lot of hard work and dedication. If you are up for the challenge and up for the stress, you can become a successful day trader with the right tools.


Conclusion


Day trading is not a career for every one; it brings to life high stress situations, and makes people work hard. Day trading was created for people to make quick money, while generally this isn’t the case; some people have done it time and time again. Before you get into day trading, it is necessary to understand how it works, and what you need.


Be sure if you are day trading that you are following the proper steps. There are a lot of tips for day traders that can help you succeed. By consistently doing the smart thing, you give yourself the best chance of making money. It’s like gambling, there is more skill in it if you develop your unique methodology.


Following tips like not letting your emotions get the best of you, and realizing you are bound to lose money will help you be the best day trader you can be. Living with your heart on your sleeve will destroy you, it is necessary to keep a cool head, and be prepared to lose money, that is why as a day trader you should never use money that you need.


If you’re looking for an exciting career where there is unlimited growth potential, check out day trading. With the proper tools, the proper research, the right equipment, and the dedication you can turn into a successful day trader. Be sure to fully understand the stock market before you jump in it and start investing. This is a great new career option for anyone interested; take a look at what it can do for you.


Disclaimer:
TO BE READ AND FULLY UNDERSTOOD

Never invest into a stock we discuss unless you are prepared to lose your ENTIRE investment.

Timeless Investor Trading Tips

10 Tips
When you start out, it is always nice to get some help. No matter what you are doing, it takes some time to learn your way and people that have been there before always have an advantage. The same is true when getting stock tips from someone who has already been investing in the stock market. Talking with someone who has already established their investment philosophy can help you to avoid some common problems. Here are 10 tips for you to follow:
Stock Tip #1 - Know How Much You Can Afford To Invest
The term for this is called risk premium and it's called that for a reason. Investing is a risk and you should only put in an amount that you can comfortably afford to lose and not affect your quality of life. Hopefully you won't lose any but you can't look at it that way.
Stock Tip #2 - Know Your Limitations
This is different from how much you can invest. Can you stick with an investment strategy? Do you make rash decisions when you are nervous? Do you pay attention to details? The honest answers to these kinds of questions will help you prepare for the next tip.
Stock Tip #3 - Create A Trading Plan
A stock trading plan is the first tangible thing you will do. This is where you will outline your strategy, your long-term goals, and your techniques for managing profits and losses. You cannot put too much in your trading plan; this is your contract with yourself for how you will trade.
Stock Tip #4 - Choose A Stock Broker
For this one you need to do some research and refer back to #2. What are your tendencies? If you manage yourself very well, you can choose a broker who charges and offers less. If you are willing and able to do your own research, get stock quotes and the like you will need less support than someone less disciplined.
Stock Tip #5 - Test Your Plan
Who says you can't get something for nothing? It's called paper trading and it is a way of playing the stock market for free. Your broker will probably have a demo trading account where you can do all of the normal things but your money is virtual. This will allow you to test your trading plan before you spend your hard-earned money.
Stock Tip #6 - Develop A Trading System
This goes hand-in-hand with the next one. A stock trading system is a method of charting and analyzing stock movements in order to determine when to buy and sell. The best trading system available is Japanese Candlesticks and the Candlestick Forum is the best place to learn it.
Stock Tip #7 - Do Your Homework
Trading relies heavily on understanding the financial condition of a company and its standing in the market. Fundamental and technical analysis are the tools to help you....make sure you take advantage of them!
Stock Tip #8 - Win Gracefully And Be A Poor LoseR
What does that mean? A poker player once told me that it is better to win small than to lose big....that might actually be the best investment advice. Winning gracefully means to take what the market gives but get out just a little too early. Likewise, no investor should be satisfied with losing money. It is important to always have and follow a stop loss strategy.
Stock tip #9 - Remember the ultimate goal
Stock trading is about making money. This isn't an ego trip or some way to out-do your buddies at work for bragging rights at the water cooler. If you stick to the plan you will do just fine in the long run.
Stock tip #10 - Never stop learning
Who has been teaching you? Have you read anything by Warren Buffett? Did you find out what Benjamin Graham thinks about defensive investing?
How about letting me teach you what I know about trading? If you learn from the people that went there first you don't have to make the same mistakes.

Tales Of Professional Daytraders

Bored in retirement from exploiting the Standard & Poor's OEX options spreads, Bob Bright got back into trading in 1992 by forming Bright Trading with partner Edward Franco as an off-floor venue for professional traders -- that is, licensed traders. Starting from a single office in Chicago, they offered traders top-drawer market access for as little as 5% of their former overhead plus trading costs of less than a penny a share.
The concept was a hit: the combination of lower costs and local offices proved irresistible to the professional traders, and so, Bright went on to open similar offices around the country, currently up to 32. To get a take on what a professional daytrader does,  Bob Bright to find out, getting his brother Don, whose title is trader and director of education for the firm, in the bargain, in a telephone interview conducted on March 14, 2000. Bob Bright's part of the conversation is noted as "BB" and Don Bright as "DB."



How did you start all this up?
DB: Bob had retired to Las Vegas in the late 1980s. I stopped trading in 1989 on the Pacific Coast and went on to do some other ventures, building and marketing electric cars. But in 1992, Eddie Franco and my brother decided to set up shop, and so they did. They officially formed Bright Trading, and by 1994 they had five offices.
What's the point of the offices?
DB: To give people a place to trade. When Bob and Ed were getting started with this venture, if someone wanted to trade as a professional, they had to go to Chicago or New York, or San Francisco, or Los Angeles. Now, because of the technology, we are able to duplicate the environment of a trading floor, but we don't have to be there; we can do it 3,000 miles away. Having the equipment and -- seriously -- the atmosphere makes a big difference.
What did you do?
DB: The more people we could get under one roof, the better, to simulate a trading environment. We ended up with 50 to 60 people in our Chicago office, but then we had people who lived in Northbrook, which is a suburb north of Chicago. So we opened an office there. Then one of the other guys wanted to move someplace else and we ended up opening another office there. What we ended up doing was expanding to 32 offices by allowing people who are experienced, qualified managers within the firm to "go home again" if they want, to Cincinnati, or Cleveland, or wherever.
When did you come on board?
DB: In late 1994 or early 1995, when Bright Trading had five offices. I had been a trader before, but I had had marketing experience in the previous five years selling electric cars to major players in Hollywood. So I was able to utilize those contacts, and I discovered I had a knack for getting the word out to people without running up advertising bills. In a business like this, you almost shy away if someone's advertising too much, because it looks like some kind of get-rich-quick scheme.
How did you do it, then?
DB: We were able to grow the office by getting the word out on the Internet. Just by using some subtle, low-key advertising, we were able to attract a lot of professional traders from the trading floor. In Los Angeles, for example, to be on the floor of the Pacific Stock Exchange cost somewhere between $12,000 and $20,000 a month to go down there and risk their money.
Between $12,000 and $20,000 a month? For what?
DB: To have a post on the exchange.
And that's not trading cost?
DB: Nope. That's just overhead. So when we offered it for $600 a month, which is what our rent is, to cover the equipment, we attracted a lot of the better traders.
They felt your atmosphere and your trading situation was as good as being on the floor?
DB: Absolutely. We have the same access to the market that the top Merrill Lynch traders would have. We use Ready Plus. We have First Alert, and Track Data for datafeeds. To duplicate what we give each trader for $600 a month, even with the costs coming down, would cost someone else between $1,000 and $1,500 a month, even to try to do it at home.
We allow remote trading, but we discourage it. It's fine for investing; it's fine for the person making an occasional trade, but if you are really going to do this as a profession, you need to be in an atmosphere where other people are doing it. Otherwise, it's what we call "hermit trading."
Why's that?
DB: When you are trading at home and you see a great opportunity, you hesitate that nanosecond, thinking, "What am I missing?" and by that time, one of our traders has got it. That kind of speed is imperative to the type of trading that we do.

Partial Profits = Fiscal Folly? About Those Early Exits !

Is exiting a portion of your trade before your profit target is hit a viable strategy?
Had I known that my career path would wind its way into professional trader status, I might have studied advanced mathematics with much more enthusiasm. After all, math is an exact science that does not lie. The way we assemble and interpret numbers to compile trading data may be subjective, but two plus two always equals four ... or does it?
Somewhere along the way, many traders have been led to believe that taking partial profits -- that is, exiting some part of a trade before the necessary profit target is hit while letting the other part "run" -- is a viable tactic. The reasons for this seem to boil down to human emotions. Some followers of this practice suggest that partial gains taken early in a trade reduce stress and allow the trader to ride out the remaining contracts, while others suggest that taking partial profits protects against drawdown (maximum loss), should a trade reverse early to halfway through its execution.
NOT AS THEY APPEAR
On the face of it, taking partial profits may look like a professional tactic. It certainly has great appeal to new traders entering our game. But is it really as beneficial as it appears?

If we can agree that math is an exact science, why don't we take a few words here to compare partial-profit exit tactics with the straight exit of trades? Assuming each trade's win/loss results happen in random fashion, we'll look at three hypothetical trading methodologies whose results over the course of time have win/loss ratios of 80%, 50%, and 40%. Finally, we will assume our profit target to initial stop-loss ratio is always 2/1. The math used in this article is meant to serve as an example only.

Finally, we will assume our profit target to initial stop-loss ratio is always 2/1. The math used in this article is meant to serve as an example only.
BREAKING DOWN THE NUMBERS
Using the Standard & Poor's 500 emini contract as the standard symbol of comparison, let's target a four-point profit exit while using a two-point initial stop for the sake of discussion. Some traders attempt to scalp for a point here or there; I personally trade intraday for five- to 10-point profit moves.
Using our three different probabilities of trading success (80%, 50%, and 40%), we can build some simple tables to see how the various exit plans would fare.
FIGURE 1: HERE'S A 50% WIN RATIO WITH TWO CONTRACTS. You can see that scaling out of trades at different stages results in a worse performance than the straight exit strategy.
Trading two emini contracts in a method that results in a 50% success rate for a win ratio (Figure 1), any 10 trades taken at random from a larger sample should yield $2,000 profit as a result. Simple math: half the trades gain four points, or $400 per-position profits. The other half lose two points, or $200 per position. The net result? You gain an average of $200 per trade over the course of time.
What happens when a trader exits half of a position at "profit target #1" (or whatever fancy phrase) for a two-point gain? Well, the average winning trade on a partial exit only yields $300 per position instead of $400 on a full exit approach. The stop-losses remain static at $200, but earning power has been effectively cut in half by the early exit for partial-profit gains.
Taking this approach one step further, I've seen exit tactics touted whereby the trader scales out in stages on multiple contracts. One such popular method is to exit 25% of an emini position at a one-point gain, another 25% at a two-point gain, and then the remaining half of the position at a four-point gain.