Heres a example– There have been 3 mil short since Nov 2005, at current avg volume (295.000) it's 10 days to cover, The first 2 mil shares got in at about 6.50 avg so they've got some room to cover.
Likewise, if you sell first you become "short". You theoretically borrow the shares you are short. Once you buy you net position is again 0.
In both cases the ideal scenario is to buy low and sell high. Or better yet to buy high and sell higher!
The opposite is also true. If you believe that the market you are trading is going to drop then you sell first, hoping to buy back at a lower price.
And does"Avg Vol" mean average number of shares traded daily over the last 5 days, 20 days, 100 days?
Or something else completely?
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.
“What do the colors mean on Time & Sales?
• • • Green = trade occurred on the Ask.
• • • Red = trade occurred on the Bid.
• • • Cyan = trade did not occur on the Bid or Ask.
• • • Yellow = trade broke either high or low for the day.”
Regarding Cyan, what kind of trade is it if it doesn’t occur on the bid or ask? I see them often with up to 4 decimal places and sometimes in large volume. What kind of trades are these and what are they called?
The yellow trades, are they the ones that have a (T) beside them i see in after hours trading? What kind of trades are these and what are they called?
Also, why is this index so important as compared to others?
Any mutual fund or ETF that is based on that particular index will need to make trades in order to make sure that it doesn't drift too far from the index. That's why there is so much trading around rebalancing days.
As for why the Russell indexes are important – the DOW (30 stocks) and the S&P (500 stocks) are an indication of how the large capitalization stocks in the US are doing. The Russell indexes give one a better idea about mid caps and small caps as well. If one wants exposure to smaller companies then these indexes are better suited than the more narrower large cap indexes mentioned above.
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.
If you are trading stocks listed on the Big Board, then you have to note that the specialist can often take a few minutes from the opening bell before filling orders. If it is a NASDAQ-traded stock, then a market maker may take a minute, or it will execute automatically (though keep in mind that if your order is in before 9:20am Eastern, you are assured the opening price). Either way, you might as well let your order be for the first few minutes of trading. Further a specialist or market maker is NOT obligated to let you out of a pending cancel if the order is due a fill. It would be a courtesy only.
The only other issue is whether your order is actually even due a fill at all. If you are offering stock at $25.75, and someone else is offering $25.70, then you are not even due an execution until the stock at $25.70 has sold (as well as everything in between there and your order). Make sense? So you want to see where the stock is offered before fretting about your own fill.
If you are the offer, then you may need wait to see whether anyone wants to trade with you at the level you specify.
Hope this helps.