Getting Started in DayTrading
First, take 50 brand new $100 bills, put them in an envelope, and set it on fire....
Actually, there are several steps one needs to take to get started.
1. Determine what your trading skills are - these can be as simple as an ability to watch the intraday tick and call the movement to as sophisticated as using real time tick feeds, Level II quotes, Expensive software and hardware, ad nauseum. The interesting thing is that one's preferences defines this and not the tools. Some of the best trader's I know don't use any tools, and the rest use everything from a few to a lot.
2 '. Determine your risk adversity. If you want to get started, you have to know what you can afford to lose during the learning period. If that is $5 grand, then use that to set up an account with a good online broker. There are several sites that provide information as to what services and rates the brokers all charge. Find one that suits your trading style. Having a whole lot of information at your beck and call doesn't do you any good if you don't know what that data implies or what to do with it.
3. To figure out what the s'data is a what one can do with it, read some of the Prin'mers like "Reading Bar Charts for Profit" (sounds silly, but trust me, if you can't read charts you can't trade well, if at all. I will list some other books later, and I am sure that some others will mention a few. Forget the Trader Vic books at this point, as that is for improving one's skills, not learning them. "Y~Understanding Wall Streek't" is another good basic book.
Determine what your trading style, method and frequency is going to be. After all, buying and holding ASND or AAPL since January would have brought you a 2-300% return (until last week that is), daytrading probably wouldn't have as one's focus shifts from day to day. Establish a disciplined stop loss policy for yourself - take an 8% loss and bail. Period. That way if you take one 15% gain and two 8% losses you break even - if you can't pick one out of three stocks to go up, don't trade. Every lesson learned trading is expensive.
Types of software should be simple at first. You could go get MetaStock to TA, but if you buy on fundamentals, that won't do you any good. You can spend a grand on neural net software, but again, if you don' use confirming indicators from other sources, you will get burned.
Don't sign up for a paid service unless you check their PRESENT profitability and hstorical profitability. And its better not to start out using them anyway because if you don't know why they have screened out the stocks then going blindly by their picks will be devastating.
Look for trending and not volatile stocks. During the learning period its better to pick up on a slower moving, higher volume (over 100k shares/day average). AMEX stocks are good for this even now.
Decide if you really want to sit in front of the screen all day watching the tick. There are no automated trading systems, and day trading requires your attention.
Paper trade - and do it over and over. If I am exploring a new market or new method or new stock, I will trade them on paper first before I ever actually buy the stock. The reason is simple - you can't know all the nuances of a stock, its industry or sector or what influences it until you live through them. Bing a good chat'rtist or technicial or fundamentalist or earnings guru wont save you when you are unaware of the other influences for specific stocks.
I will try to put together a more coherent summary later(or if someone has some of my old posts from 12-18 months ago on SI and would be kind enough to post the thread).
One last caveat - there is no secret, andthere is no right way and there is no one method/strategy/source. Like anything, it is a skill that can be learned and used if you follow some basic disciplines and relate your persona/skills/tools/level of effort to the problem.
lastshadow |
