Excellent post, Eric.
I wrote this to a guy that asked me about day trading:
1. Don't do it. It is probably the most difficult way to make money in the stock market that there is. If you have the idea that it is easy, or easier than more conventional ways of making hits in the market, you are mistaken.
2. Day trading can be the single most lucrative job in the stock market. If you are seriously interested in becoming a day trader, you will need to devote your entire day to it for a minimum of 9-12 months. Even with that commitment, there is a better than 50% chance that you will fail. It might take 2 years. It might take 3 years. Even then, you could still fail.
3. If you are still interested, I will outline some basic advice to get you started.
First, you need to understand how the markets work. What I mean by that is that you have to have a fundamental knowledge of how stocks are traded, the exchanges, the rules, and so forth. If you have traded securities in the past, you probably have some of this knowledge. A Series 7 license is an advantage, but just because you are a broker does not mean you will be successful at day trading.
Secondly, you need the best equipment available. I am not talking about software that picks stocks. Software that picks stocks is essentially useless for day trading, due to the fact that a machine operates on information about the past, and day trading operates on information that is one or two minutes old, if that. Any software package you buy will give you potential plays, but the plays will be longer than 24 hours, so you don't need it.
Anything you need to know about choosing a stock to trade during the day can be done in less than 30 minutes every night on the Internet, if you know what to look for. I know of no professional day traders that pick their target stocks from a computer program.
The best tool for day trading is Level 2 with short term charting capability.
The best access vehicle is a high speed cable feed, such as "Roadrunner". A telephone line is a distinct disadvantage. Roadrunner is twice as fast as the best telephone line you can buy ["T-1"].
If you want another source for a setup, find a day trading outfit in your city and get a remote feed.
You must be ready to lose one half of your equity before you get familiar with the day trading process, you must be familiar with the markets prior to beginning, and even then you will have a less than a 50% chance of success.
From my personal experience, less than 20% of the people that try day trading are successful after 6 months, and more than half lose all the money they start with. |
