Day Trading

Pros First:

Work when you want
You are your own boss
Holidays off
If successful, you can make a ton of money
Work wherever you want as long as you have a pc and internet connection
Very low economic barriers to entry
Unlimited growth potential
Your ego will get a stroke when you tell people that you trade for a living
You'll learn more about your inner self than you would joining a convent

I'm sure there's more, but those are the big ones.

Now the Cons:

The educational learning curve is very steep.
You need to have at least $30,000 that you can afford to lose as well as 6-12 months of living expenses.
Inconsistent income with no benefits.
You will lose money for at least 6-12 months, period.
Everyone you know will think you're crazy, especially until you turn a profit which could realistically take years.
All of your personal flaws will be magnified, thrown in your face, and cost you money.
Its a very lonely job with little social interaction.
You may spend years of very hard work & study and still lose everything, can you handle that emotionally?
Just when you think you've got it, the markets will change and you're system will no longer work.
You are competing against the best professionals in the world, why would you have a chance?

There are a lot of really good pros to day trading but you need to be realistic in your expectations. Though you get to set your own hours, if you want to be successful, you must be willing to work at it just like any other job.

When things go well, don't get cocky, when things go bad, don't get down.

The odds are that you will fail, but don't let that discourage you from trying. Get as much education as you can and if possible, hook up with a profitable mentor to show you the ropes. And if you can't stand to loose everything and still be sane at the end, walk away now.

Hope this helps

An important aspect of day trading is to have a set investing plan. Day traders don't always make a profit on each trade they do during the day but if they keep to their plan (if it’s a good plan) they will be more likely make a profit for the day.

The barriers to becoming a day trader are experience and cash. You need both to succeed in the stock market.

They impact the market in a few ways. First they add volume to the market. They also can increase the speed of spikes. When a day trader sees his stocks tanking he will sell them. This will drive down the price more. Conversely if he sees a stock that is starting to rock he will buy. This will increase the value of that stock.

Some good places online to share info with others and learn are;

investorshub.com (my favorite)
siliconinvestor.com
ragingbull.com

many boards are devoted to trading at the above sites. you can sign up for free memberships at all 3. Ask the traders on the trading boards what software they use.

I have been a trader, investor, broker, etc. and it is rare to see anyone who is not a professional trade for a living. If you got it, then you will know pretty soon. You have to be able to set your stops, take your losses if needed.

Also read "trading for a living" "come into my trading room" both great books from Alexander Elder.

Not all traders are day traders, and most are not, but they are not opposed to taking a profit when a position hits an early exit point.

Day traders get much press, good or bad, because many amateurs are amorous of the title and the action, but realistically they are not in the majority.

Many traders also are investors, and do buy for the long term. But long term to a trader is 9 months to a year. They'll use their equity positions to write cover calls especially playing the dividend. The equity is long term and the option is held only for a week or so.

Trading can afford one a very nice living and an above average life style.

Depending on what you invested in, you could have to register with the SEC. Additionally, you would be signing up for double taxation! You would have to pay additional legal and accounting fees, and could have your quarterlies audited by the IRS.

There are absolutely no advantages to this scheme. Never mind that if you tried to become a trader for a living, you would become homeless, as more than 90% of "day traders" lose more than 2/3 of their capital in the first year.

Not to mention that this would look a hell of a lot like money laundering to an outsider (someone who creates a shell holding corporation to avoid having his name attached to the movement of significant amounts of cash moving across state lines is a pretty good way to meet some kind agents from the FBI).

It's never a good idea to try to outsmart the federal government – sure, they might not be the smartest bunch in the room, but they sure know how to hold a grudge.

Any person, website, company that is going to charge you for trading tips is most likely making more money on you than they ever will following their own advice.

The whole premise behind active trading is that the market is ineffeicient and thus, short-term opportunities arise to take advantage of such innefficiencies. The problem is that once an inefficiency is identified and gets mass publicity, it ceases to work as the trading/investing community starts to discount that information into the price.

What you need is education, not tips. Its the difference between being given a fish and learning to fish. Some strategies very well may work 80-90% of the time IN SOME SCENARIOS. But nothing will work 80-90% of the time in every kind of market.

There are really 2 main kinds of strategies out there.

1.) Those that work in a trending market
2.) Those that work in a range

The only thing these paid services are SOMETIMES good for is leads. Its up to you and your education & judgment to determine if these leads are good enough to implement with your hard earned cash.

But in order to decide this, you must have some method that you are consistently using to discriminate between what makes a good and what makes a bad trade. If you are not willing to take the time to learn this, then you should simply put your money in an ETF and/or mutual fund and be happy with getting your 8-10% on average.

If you are willing to educate yourself there are a number of resources available to you.

http://www.EliteTrader.com is a thriving community of traders where you can get brokerage reviews, vendor reviews, educational material reviews, etc…well worth looking into.

http://www.WilyTrader.com is a blog where you can see first hand what it is like to be an active trader and get a feel for the different kinds of strategies that are necessary for success.

http://www.traderfeed.blogspot.com is Brett Steenbarger's website where he talks about the psychological aspects of trading

http://www.Amazon.com : and look up the following books/authors:
The Master Profit Plan
Mastering the Trade
Brett Steenbarger (Get both of his books)
Trading For a Living

In short, just be very careful about any service offering you the sky. I guarantee you that such rewards to not come without great risks, and more often than not, those risks will come to fruition way before you see a dime of those rewards.

Hope this helps

By law the minimum amount needed to open a daytrading account is $25,000. This will open a margin account, with which you can daytrade up to four times the amount that you have in your account. So with a minimum account of $25,000 you can daytrade up to $100,000 per day. (There are some restrictions) You must pay interest on any amount that you hold overnight that is in excess of the cash in your account. Daytraders never hold anything overnight.

There are many different styles of daytrading. You can trade gaps up, or gaps down. You can trade technicals or breakouts. You can trade a particular stock or group of stocks. Each style requires a specific set of tools and the skills to use them. At a minimum you will need a good broadband internet connection, streaming level 2 quotes, and a good broker. Quotetracker is a good, free platform that you can download and try, just to get a feel for what is involved. Also I believe that Scottrade will let you download and try their platform for free.

The broker that you choose depends upon your style of trading and the volume that you trade. Flat fee commission brokers like Scottrade are fine if you trade volumes above 1000 shares at a time. On a thirty dollar stock, that's $30,000 per trade. Personally I may buy more than 1000 shares, but I'll often take a position 100 shares at a time. So in my case paying $7 for each of those 100 share trades would kill me on commissions. Instead I use a broker that charges per share, not per trade. If you're not dealing in high volume it's best to pay per share, not per trade. That way you can buy 100 shares and it will only cost you $1 in commission.

The other thing that you should consider, just in case you do make money daytrading, is taxes. Although the advent of online tax services has made keeping track of all those daytrades considerably easier, it can still be a headache. It's much easier just to buy a stock, hold it all year, and then pay the taxes on it. Very simple.

I do not believe that daytrading is the best way to go for a beginner. It would be better to start by just buying and holding, or swingtrading. Personally I now use a service that sends me alerts on what to buy and sell. It actually works much better than I could ever do on my own, and it's a whole lot easier. Still it's quite common for me to lose $1000 or more per day. But on average my up days far outweigh my down days.

Yes, I do this for a living, and it is much easier than having a real job.

Hey! You have done well. You have a good split between domestic equities and foreign stocks, but I think you should look into some small cap growth and small cap equity mutual funds.

Have you looked at the American Association of Individual Investors?

If I were young or even middle age, I would be investing in small cap growth mutual funds or stocks. Go here for excellent low cost advice (http://www.aaii.com/aaiiportfolios/commentaries/stockportfolio/200701comment.cfm).

Don't be alarmed at the low cost – it has some of the best financial advice on the Web.

If you have lots of time before retirement the magic of compound interest will just keep building and building. It really works and if you keep investing and re-investing your proftis every year, in 10 or 15 years you will be surprised at how it mounts up. In 30 years you could be a millionaire which probably won't amount to much in 30 year owing to the the ravages of inflation. But stocks are a good hedge against inflation.

By that time you may need a money manager to manage your money – probably before when you reach the $500,000 mark. Heck! If you have achieved that much, you probably don't need a money manager – you are the best judge of where to invest your money by that time.

And that's the primary reason to keep investing in small cap growth stocks – they will flog inflation to death.

When investing in mutual funds, select the no-load funds only. Do not invest in mutual funds with a "load", an up front commission that you have to pay before when they sell you the mutual fund. Some charge as much as 10% which is a rrip-off. Many studies have shown that the no-load funds do as well as the load funds and sometimes a lot better.

Look at the AAI Shadow Stock Portfolio. I would try and emulate that portfolio if you want to invest in stocks. It was up 25% as of November 2006. The Vanguard Index fund is only up 14%.

AAII has some of the best financial advisers and the cost is very low. They have excellent guides and advice.

You may need a broker so go to e-Trade or Scottsdale who have low commission rates.

Do your own due diligence. Your own ideas are the best. Do not depend on someone else to select investments for you. Learn about investing so you don't have to ask what stocks to invest in.

Be self reliant.

Remember what Emerson said: A foolish consistency is the hobgoblin of little minds, adored by little statesmen and philosophers and divines. With consistency a great soul has simply nothing to do.

Find stocks that have steadily rising net profits (earnings), low debt, and good P/Es, lots of cash, companies buying back their stock..

What interests you? Find stocks that pique your interest and passion.

You need fast growing good stocks with good earnings and in good sectors. You need to learn more about the stock market before you even think about investing in it.

The stocks world is divided into 12 sectors such as energy which chevron belongs to. It is next to last in the sectors list today.

Technology is numero uno, but things can change in a new york minute, but within the sector, the fastest growing are computer services, not Microsoft. Then, Electronic Instruments and controls. Next is computer storage devices.

The next hot sector is Healthcare, but heed the warning below. Go here for sectors: (http://clearstation.etrade.com/cgi-bin/Itechnicals?Event=srp&Section=redge&Refer=/redge.html)

The best software is Vector Vest if you can afford it. It has sector investing.

Here is a free Web site for charting stocks: (http://www.incrediblecharts.com/).

First of all, stay away from "professional brokers" and tips coming to you via e-mail or friends and acquaintances. And tips at Yahoo! Answers. And e-mail tips. Do your own due diligence – don't rely on someone else. Read Emerson's essay "Self Reliance.

Hey! They will say anything to get you to buy their junk. If it's too good to be true, it is.

Remember this, they are just sales people trying to sell you what their firm is pushing. They are not security analysts or financial planners, not even financial advisers. Trust me, I know from experience that they cannot be trusted especially with a million dollars. You risk losing it all. A million dollar account is known as a "whale" and they would love to get their greedy little paws on it and suck it dry. They just want to make commissions on what they buy and sell for the suckers, err…clients..

Get this book: The Market Gurus: Stock Investing Strategies You Can Use from Wall Street's Best (Paperback)
by John P. Reese (Author), Todd O. Glassman

Risk avoidance is the name of the game.

Remember, the harder I work, the luckier I get.

Penny stocks are highly speculative. I would avoid the ones under a dollar a share. For example, Best Buy started at less than $5. So there are some good companies, but it takes a lot of digging to find the good ones. You are looking for companies with good earnings, little debt, low capitalization, and good P/Es. For stocks under $5, very few will meet these requirements.

Stay away from the pharms unless they have patented drugs – do not invest in generic pharms, no growth there.

Check out which business sectors are the most popular and invest in the companies in those sectors. The number one, two and three are: technology, health care, and cyclicals (retail). These change periodically so keep current.

Go here for a list of growth stocks: http://www.thestreet.com/_googlen/newsanalysis/ratings/10345212.html?cm_ven=GOOGLEN&cm_cat=FREE&cm_ite=NA

There are these lists all over the Web – you pays your money and takes your chances.

Watch CNBC, but don't pay too much attention to the talking heads, except for Jim Cramer, the wild man – but he tries to teach you how to invest and has some great advice.

Get Jim Cramer's Real Money: Sane Investing in an Insane World by James J. Cramer

Listen to Jim Cramer on CNBC.com

Go to Clearstation for quotes and tutorials on investing at (http://clearstation.etrade.com/). Sign up is free. Look up a few stocks. Do their tutorials. Check out the sectors.

Get this book: Value Investing: From Graham to Buffett and Beyond (Wiley Finance) by Bruce C. N. Greenwald, Judd Kahn, Paul D. Sonkin, and Michael van Biema.

Another good book: The Motley Fool Investment Guide for Teens: 8 Steps to Having More Money Than Your Parents Ever Dreamed Of (Motley Fool) by David Gardner, Tom Gardner, and Selena Maranjian

Jim Cramer's Mad Money: Watch TV, Get Rich by James J. Cramer and Cliff Mason

I Want to Make Money in the Stock Market: Learn to Begin Investing Without Losing Your Life Savings! by Chris M. Hart\

Sensible Stock Investing: How to Pick, Value, and Manage Stocks by David P. Van Knapp

Stock Investing For Dummies (For Dummies (Business & Personal Finance)) by Paul Mladjenovic

All About Stock Market Strategies : The Easy Way To Get Started by David Brown and Kassandra Bentley

The Motley Fool Investment Guide and their Web site (http://www.fool.com/).

The Little Black Book of Microcap Investing: Beat the Market with NASDAQ/AMEX Microcap Stocks, OTCBB Penny Stocks, and Pink Sheet Stocks by Dan Holtzclaw

How To Make Money In Stocks: A Winning System in Good Times or Bad, 3rd Edition by William J. O'Neil

Trading for a Living: Psychology, Trading Tactics, Money Management by Alexander Elder

Big Trends in Trading: Strategies to Master Major Market Moves (A Marketplace Book) by Price Headley

Extraordinary Popular Delusions & the Madness of Crowds (Paperback)
by Charles Mackay (Author), Andrew Tobias (Foreword) This book talks about the Tulip craze in Holland where people would mortgage their homes to buy Tulip bulbs. Same thing happened in 2001 – 2002 with the Internet bubble that brought the stock market to its knees. The dot com companies were the Tulip bulbs.

Buy Investors Business Daily. It has lots of tutorials and I like it better than the stodgy Wall St Journal.

Money Game by Adam Smith

Common Stocks and Uncommon Profits and Other Writings (Wiley Investment Classics) (Hardcover)
by Philip A. Fisher. Recommended by Warren Buffet who took $100,000 and grew it to $34 billion!

Value Investing with the Masters by Kirk Kazanjian

Valuegrowth Investing by Glen Arnold

The 5 Keys to Value Investing by J. Dennis Jean-Jacques

The Intelligent Investor Rev Ed. (Collins Business Essentials) by Benjamin Graham. Warren Buffet was his student at Columbia.

The Money Masters by John Train

The Bogleheads' Guide to Investing by Taylor Larimore

Common Sense on Mutual Funds: New Imperatives for the Intelligent Investor by John C. Bogle

Why Smart People Make Big Money Mistakes And How To Correct Them: Lessons From The New Science Of Behavioral Economics by Gary Belsky

Rule #1: The Simple Strategy for Successful Investing in Only 15 Minutes a Week! by Phil Town . See his Web site at (http://www.ruleoneinvestor.com/). Free sign-up. I got the book at the library.

Listen. You don't have to spend a lot of money on these books – most can be found at your library and those that your library doesn't have they can usually get from other libraries in your state.

Most of these books talk about stock and mutual fund investing, but for a good introduction to other forms of investing Gerald Appel has a great book called Opportunity Investing – How to Profit When Stock Advance, Stocks decline, Inflation Run Rampant, Prices fall, Oil Prices Hit the Roof and Every Time In Between.

First, Break All the Rules: What the World's Greatest Managers Do Differently by Marcus Buckingham and Curt Coffman Not a book on investing, but it's a nice segue into the next book.

Now, Discover Your Strengths by Marcus Buckingham and Donald O. Clifton

Go Put Your Strengths to Work: 6 Powerful Steps to Achieve Outstanding Performance by Marcus Buckingham

Finding your strengths is important when investing. These books teach you to build on your strengths, what you a good at. Everyone is good or passionate about something. Why not get better at what you are good at?

Another good book is: Opportunity Investing: How To Profit When Stocks Advance, Stocks Decline, Inflation Runs Rampant, Prices Fall, Oil Prices Hit the Roof, … and Every Time in Between (Hardcover)
by Gerald Appel

Most mutual funds do not even keep up the the return on the S&P. That's like 99% of them.

Vanguard Index funds are a no brainer.

A CD is better than a savings account. They range from six months to several years. You cannot touch your money tho until the time limit is up.

Check out this Web site on Direct Investment Plans where you can buy shares directly from companies: (http://www.fool.com/School/DRIPs.htm). Usually no fees and you can buy one share at a time.

Bonds are probably the safest. But they are not for the young. You might try a bond fund. They might return 5 or 6 percent. At 5% a million would return $50,000 a year – not a bad income. Remember, you have to pay taxes on the $50,000.

There are also municipal bonds and the income from them is taxfree especially if you buy them in a state that offers them, but they only pay about 3%, but it's mostly taxfree.

Look into Fidelity sector funds. Buy the top three, then in six months look how they are doing and if not so hot, select the next three that are best. Do this for a few years and you will make lots of money.

Kindest Personal Regards,

Walt Brown
Site Build It Certified Webmaster

http://buildit.sitesell.com/waltera1.html

capecod1@capecod-beaches.com

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wab@theworld.com

P.S. This is a life-long learning process. Reading these books and applying the rules to analyzing stocks that may be good It takes time. Be patient and keep reading and listening. Don't be a sucker and follow someone elses advice. Be your own man or woman. Depend on no one except yourself. You can only get smarter and stronger that way.

P.P.S. Internet has lots of good stuff, for example (http://stockcharts.com/school/doku.php?id=chart_school:technical_indicators:moving_average_conve
Stockcharts.com is very good and their discussion of MACD is one of the best, barring its originator, Gerald Apple, but now we are getting into Technical Analysis and that is not for beginners. But it is an important factor in finding good stocks that are going up and growing. Remember, tiny acorns grow into mighty oaks.