Day Trading Checklist

Facts you should know about day trading before you start.

You can start Day Trading with $750 and a cheap PC.

If you decide to start day trading using a spread betting account rather than a standard broker, you can start with as little as $750, and ignore the day trading regulations about trade frequency. To day trade stocks using a standard brokerage account (8 round trips or more per week) you need more than $25,000 in your account as per govt regulations established in September 2001. You don't need a 'super PC' and a direct access account either. The average spread betting firm will give you access to a day trading system that runs happily in the browser of a low end PC on a dial-up internet account.

Day trading is NOT the most dangerous form of trading

The press is full of stories about the "danger" of "day trading". This is scaremongering by the misinformed, because day trading simply means not holding any position beyond the current trading day; i.e. closing all outstanding positions by the end of the session so you are 100% cash overnight. In reality, day trading done corrctly is the SAFEST form of trading, because you are not exposed to unforeseen events that happen out of hours (like the fall of Enron!) and the accompanying ENORMOUS losses that can happen during the hours when you cannot trade. Many day traders only hold positions for minutes - and the less time your cash is IN the market, the less chance something can go wrong. Anyone claiming to be day trading who holds positions overnight is fooling themselves.

Build up your day trading skills with training - practise!

Day trading is like running any other business. Adequate training, experience, capital and dedication is required. Over time, you may find that day trading becomes easy, but you will have to 'put in your time'. And day trading is a full time job - you need to be ready to trade whenever the market shows you an opportunity. If you have limited time to trade, you should consider swing trading instead of day trading.

Preserve your capital at ALL costs.

Limiting your losses when day trading is FAR more important than making profits. Day traders go bust because they lose money, not because they don't make enough of the stuff. When day trading, set yourself a limit on how much you are prepared to lose on a particular trade, and set your stop at that level. NEVER move your stop the wrong way (e.g. if you are long, and price starts to fall, NEVER lower the stop). If the day trading stop is hit, take the hit. Over time you will get better at placing stops anyway. Remember that you can make a fortune day trading being right only 30% of the time, as long as you cut the losses on your 70% losers so that the profits on your 30% winners outweighs them. Also set yourself a day trading limit - if you lose this much in a day, quit trading till the next session. You won't be able to 'force' profits from the market.

You won't learn day trading in a day.

An obvious point, but different people learn it different rates. The only way to jump start the process is either to find a mentor (a successful trader who will ride shotgun for you) or to use one of the proven methods that have defined rules, such as the . Even this requires practise though, and you shouldn't expect even to be past paper trading by the end of month 1. Keep at it day trading is like any skill - nothing worth having comes easy.

Knowing when to exit is as hard as knowing when to enter

Day trading is an inherently variable business - some days you might make thousands, some days you might lose money. The one thing you WON'T do is make consistent money day trading every day - markets just aren't like that. If you learn to day trade in a style that lets you run your winners, and chop your losers ruthlessly, you WILL succeed.

Day trading doesn't mean trading every day

If you don't feel like trading, then don't trade. If you force it, you will likely lose. And too many losing days will start to give you a complex about it until you eventually become too scared to 'pull the trigger'. Trading shoudl be fun, and if you want to day trade for a living, not only must you make money, but you must enjoy it too!

Back | Forward

bid and ask | day trading | day trading software | ECN | direct access trading | nasdaq level II | market maker | paper trading | support and resistance | short-term trading | spread trading | stop loss | technical analysis |