Day Trading

Day Trading, in the final count, is really a combination of skill & luck. In that sense, it's akin to gambling.

Sure, using TA methods like Japanese Candlesticks, and RSI and MACD will help you get a SLIGHTLY better picture, but TA does not allow for the emotional aspect of it – say, when a stock in a particular sector blows up due to mismanagement or fraud, all the other stocks in that sector go down because of "guilt by association".

And, when folks panic for whatever reason, they dump stocks regardless of whether they are good or bad.

If I were to resume Day Trading ( I gave that up some time ago ), I would depend most heavily on the MOMENTUM indicator, and not hold for more than a few hours.

From experience, it is VERY difficult to make money consistently in Day Trading, and I hope you will consider a longer term perspective.

Choose stocks with good fundamentals, good management, a stable market space, then buy some. The probability of being able to exit with a profit increases the longer you hold it.

There was a strategy popularized in a group called the turtles several years ago. One of their features was to watch for a price break out of a moving average number. They commonly used 50 or 200 day numbers, but your 100 day will work too.

If you notice price fluctuations over time, there seems to develop something some people call ceilings and floors. The price seems to stay within a channel. In statistics you would call that a standard deviation, as practically applied–technically, it is a bit more involved, yet it is a functional equivalent of the principle.

Now, if the price of the stock or commodity contract "breaks out" of that corridor, whatever caused that would likely have some strength or momentum to it. The turtles found that they got to get more action in watching the 50-day moving average breakouts, but there was more strength and better results in waiting for a 200-day breakout. Bear in mind, it didn't matter which direction the price broke because they would buy (go long) for increasing prices or sell-short (go short) for falling prices.

Next you apply a stop loss of some sort, usually a trailing stop of something like 5 or 10 percent depending on how volitile (how the price flops around). Just because something set a new higher or lower price than it experienced recently doesn't mean it will be a straight shot up or down.

You will need a computer that is quick you will also need a highspeed internet connection and most importantly you will need level 2 charts that are not delayed that are up to the minute tick for tick with the market, which you will probably have to pay a subscription for. Most charts on the internet are delayed. If you don't know how to day trade you will need to learn how which I am assuming you don't understand the true concept of day trading most people don't they think it is based on volatility and momentum which couldn't be further from the truth. It is based on mocking the specialists and getting inbetween the bid ask spreads which have become very tight in todays markets. so educate yourself before you start.

This can work – it depends on how much attention you're willing to devote to it. I have found that any time I take my attention off of the market for a few hours or a few days, I'm punished by an opportunistic turn that I missed. This is not a maybe – it will happen if you're not at your desk. And when I focus 9:15 through 4:15, I perform, with a couple hours homework a night.

The books recommended by others here are great. It's hard to advise you further not knowing how much you do/don't know about the market. The paper trading practice sites are an essential. Try those out in earnest and you'll save yourself from unnecessary mistakes later when errors cost real money.

I find that it's important to do a few things:

1. Chart the S&P for uptrends and downtrends – when you see an established trend the market will tend to move that way, and stay within the down slope and up slope "channel" in its daily activity for multiple days. This gives you added confidence as to when to "buy", when to "add to" your position, and when to cash out. When a stock busts out up or down that can be the opportunity to get in or out (depending on direction) of a given index, ETF, or stock. This will also help you stabilize your stock monitoring because you will focus on the stocks at present which are near "support (floor)" or ceiling (resistance)" positions. To help me do this, I've found it is incredibly valuable to have a second computer screen (I use two PCs because I'm mobile when I want to be) with several key screens of data/chart references.

One screen has no more than 6 stocks I'm watching that day, with charts on each screen.

One screen has all major sectors' charts on it – by sector fund (USO, OIH, etc.)

One screen has 52 week uptrending stocks I'm monitoring for pullbacks

Other screens are categoric (e.g., AG companies)

2. Using other resources such as the 52 week high stocks (WSJ, YahooFinance, Google Finance, etc.), and Top 100 (IBD.com) are also opportunities to check for trends, and determine whether to jump on this momentum during a given day, or to wait for a pullback and get in before a multi-day upswing for a multi-day "swing" trade. If you put in the time, you will identify pending breakouts.

3. Listen to Fast Money to pick up on hot trends and expert interviews that can indicate stocks to watch since they have such a wide audience.

4. Keep track of volume levels and beware of low volume days.

5. Track sector movement and rotations. Institutional buyers will dictate what will move, whether it "makes sense" to you or not.

6. Listen to Art Cashen (sp?) – every morning about 9:15 AM EST before the market opens. His insights are usually good indicators to align with or watch for. Good pulse on the market.

7. Know that a margin account can be traded every day with no interest if you don't carry it over night. Non-margin accounts will have a 3 day carry cycle until you can reinvest the funds.

Best wishes for success. Cramer can be a goof on some topics, but knowing what he's tracking can also give you one or two key stocks to watch for the next day if conditions align to support those stocks. His trading rules lists are very good.

You need to get educated about business. Most day-traders lose to the market over time.

While day trading is neither illegal nor is it unethical, it can be highly risky. Most individual investors do not have the wealth, the time, or the temperament to make money and to sustain the devastating losses that day trading can bring.

Here are some of the facts that every investor should know about day trading:

Be prepared to suffer severe financial losses

Day traders typically suffer severe financial losses in their first months of trading, and many never graduate to profit-making status. Given these outcomes, it's clear: day traders should only risk money they can afford to lose. They should never use money they will need for daily living expenses, retirement, take out a second mortgage, or use their student loan money for day trading.

Day traders do not "invest"

Day traders sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They do not know for certain how the stock will move, they are hoping that it will move in one direction, either up or down in value. True day traders do not own any stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Day trading is an extremely stressful and expensive full-time job

Day traders must watch the market continuously during the day at their computer terminals. It's extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends. Day traders also have high expenses, paying their firms large amounts in commissions, for training, and for computers. Any day trader should know up front how much they need to make to cover expenses and break even.

Day traders depend heavily on borrowing money or buying stocks on margin

Borrowing money to trade in stocks is always a risky business. Day trading strategies demand using the leverage of borrowed money to make profits. This is why many day traders lose all their money and may end up in debt as well. Day traders should understand how margin works, how much time they'll have to meet a margin call, and the potential for getting in over their heads.

Don't believe claims of easy profits

Don't believe advertising claims that promise quick and sure profits from day trading. Before you start trading with a firm, make sure you know how many clients have lost money and how many have made profits. If the firm does not know, or will not tell you, think twice about the risks you take in the face of ignorance.

Watch out for "hot tips" and "expert advice" from newsletters and websites catering to day traders

Some websites have sought to profit from day traders by offering them hot tips and stock picks for a fee. Once again, don't believe any claims that trumpet the easy profits of day trading. Check out these sources thoroughly and ask them if they have been paid to make their recommendations.

Remember that "educational" seminars, classes, and books about day trading may not be objective

Find out whether a seminar speaker, an instructor teaching a class, or an author of a publication about day trading stands to profit if you start day trading.

Check out day trading firms with your state securities regulator

Like all broker-dealers, day trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator and at the same time ask if the firm has a record of problems with regulators or their customers. You can find the telephone number for your state securities regulator in the government section of your phone book or by calling the North American Securities Administrators Association at (202) 737-0900. NASAA also provides this information on its website at www.nasaa.org/QuickLinks/ContactYourRegulator.cfm.

Instead, read the Intelligent Investor and follow Warren Buffett. Get a great job and invest the proceeds wisely.

Best Regards,

Docmase

Because if the volume is low, only a few people were satisfied with the new price level.

Although I am not certain that I agree with their logic 100% – whether the volume is low or high, there were an equal number of buyers and sellers, i.e. people who thought it was the right time to get in, and people who thought it was the right time to get out.

That is why indicator's giving an indication of momentum works better, and why you need to analyse trends, not individual data points.

You are actually talking about the difference between trading and investing. Trading is short term and it basically seeks moves based on news or momentum from stampeding herd of buyers/sellers so you simply ride that move for the duration, usually a a few days max.

The other long term strategy is to buy good companies that keep making money every year and wait many years as their shares grow with the earnings. This is the usual way normal people invest their money for the long term. In the short term trying to catch moves is exceedingly difficult for non-professionals.

I think you have the facts confused; it was in the past illegal to sell short on a down tick, and short sales could only be made on upticks or even trades after an uptick. The purpose of this rule was to limit persistent short sales for the purpose of driving down a stock's price. That rule was recently abandoned, and yes, I think it has had an effect on a few stocks, which have been shorted relentlessly by 'momentum' traders.

Assuming you bought your call option on the open market, you can always sell it at any time. The sale won't necessarily be to the person you purchased it from (the call writer).

As for whether you should sell now, that's a more difficult question. A $4 premium on a strike that was double the stock price seems very high to me for a 5 month option. But if the stock increased that much in 2 days, the volatility must be very high. You still have 5 months left before option expiration. You have to look at the characteristics of the underlying stock and its stock chart to see what the best course of action is. Some of these momentum stocks can run up (and down) hugely in a matter of days. Why did the stock go from $30 to $48? If it was due to a buyout at a price of $48, then you should sell the option as it is unlikely that a $60 buyout price will emerge.
Options are very risky and should only be used by people who know what they are doing.

You need a minimum of 25,000$ to day trade. If you get your series 7 license though, you might be able to go to Bright Trading with 10k (I would call them first though) They give you use of their capital (millions of dollars) but you can seriously get stung with a bad day.

Dont trust the sim programs because on them, you get your orders right away. In real life when you do limit orders, you sometimes dont get in at the price you want. (or get out) Sometimes you place a limit order and you have several thousand shares ahead of you waiting for the same order then the price moves and you dont get filled.