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!
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The SureFireThing Camarilla Equation for use in day trading is available online from these