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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Time Traveler who wrote (3814)	9/12/1999 8:45:00 AM
From: funk	Respond to of 18137

i really disagree with that premise. I think the best thing a newcomer can do, is start out with a small account. Lets get real, a nice steep learning curve is staring you in the face. Anyone that has climbed it will tell you that losses and pain are a certainty. So why not start off with a smaller account and duke it out for a little while and see how things go. You could always add more to it later. But if you are adding more because you just pissed away your initial amount, then perhaps that would be a good time to really take a look at how you handled yourself. I think if you can't make money with 10 or 20k in cash, then you are just going to lose more with 100k in your account. Start small and develop discipline. imo best wishes,

To: Time Traveler who wrote (3814)	9/12/1999 9:23:00 AM
From: Eric P	Read Replies (3) \| Respond to of 18137

This article talks about the amount of capital, the more you have in the beginning the greater chance of success. That makes sense because of the commission cut. Any idea how much capital would put you into the 75% bracket of success, that is assuming you have the know-how of course? I think it would be very difficult to be consistently profitable with an account size of less than $10k. This is not due to any reduction in commission costs given to high volume trading. This is a result of the much small position size that is possible with a small account relative to the per ticket commission rate. For example, a $5k margin account ($10k buying power) could only buy 200 shares of a $50 stock. Even assuming a reasonable commission rate of $20/ticket, the round-turn commission cost of $40 works out to be $0.20/share on your position. In other words, you will need to average a 1/4 point profit per trade just to break even. Not impossible, but much more difficult. Certainly, to be successful, a longer time frame or lower stock price would have to be considered to increase the chance for success. However, I think this discussion misses the real issues faced by a trader opening up a new account. The critical issue is NOT to be profitable, initially. The critical issue is to lose the minimum amount possible as you learn the ropes of daytrading. Sounds crazy, I know. But 99.9% of new daytraders will 'profit' from acknowledging that they will lose money in their first several months, and therefore seek to learn as much as possible while losing the least amount as their tuition fee. A smaller account can be perfect for this. I think a new trader ought to be able to open a $10-15k account and trade for 2-3 months will losses totaling no more than ~$5k. This trader may only make 0-2 trades per day, and will focus primarily on a lot of watching, reading and paper trading. He will only attempt the trades that look almost perfect to him. Then he will focus only learning why that apparently perfect trade lost money. These trades will initially be 100 shares, and should not increase in size until the trader is averaging a higher selling price on his trades than his buying price. Once the trader has learned to be successful and consistently profitable he can safely add capital to bring his account to $100k+ and trade much more actively with higher position sizes. Until the trader has learned the expensive lessons along the Learning Curve, it is a mistake to trade a large account size, or to trade actively/frequently. Good luck, -Eric

To: Time Traveler who wrote (3814)	9/12/1999 10:09:00 AM
From: HairBall	Respond to of 18137

Time Traveler: Actually I do not agree with everything the article had to say, but I do think it made some good points. If I were writing an article on daytrading I would include my nine rules of trading (see below) coupled with (do not trade before the first 20 minutes or after the last 20 minutes). I would also tell folks to learn how to interpret both fundamental data and how to trade using a variety of technical analysis tools before starting. One needs to understand the rational behind the TA tools not just the math. Actually knowing the math is less important than the rational behind the technique. Next paper trade until you have a system that makes money consistently and reduces losses to a minimum. Then start to trade with a margin account of no more than 10K and no less than 5k. Initially take only 100 share positions. This will take you to the next level, learning how to get timely fills and what to do when you don't. I know this will be hard to take when you catch a big runner and you say to yourself I shoulda coulda, but this prevents major losses while still learning. The old gold prospectors knew once the grubstake was gone, the prospecting was over. As you increase your capital base through your wins and experience, you can gradually increase your exposure to the Market and learn how to time larger and larger order executions, as you learn the reality of getting larger and larger orders filled in a timely manner. The lower the liquidity of an issue, the less you can depend on quick order executions (fills). Thus, the greater the risk, if you are wrong! Use your additional capital to help support you while you learn to trade. I know many "gurus" suggest that if you do not have at least 50K to start daytrading you have little chance at success. I suggest that is BS. If you start trading with a large amount of capital before you learn and establish a system that makes money consistently and before you learn the reality of getting order fills, you will just help line the pockets of the "big boys" with all that extra capital. Sure starting with a small amount of capital will make it harder to make big wins, but it will also limit your losses as well. It will also force you to work harder. Trying to get rich quick in the Market can be the quickest way I know of going broke. Now, for those of you that read this and have been successful right out of the gate, remember there are always exceptions to the rules, but an exception is exactly what you are! Regards, LG PS: If you are lucky and catch a big runner or three early, set that money aside and continue to trade with small positions and gradually increase your exposure as you learn how to trade with larger and larger positions. That way you will not a have false sense about your abilities and eventually loose much if not all or more of your gains. My Nine Trading Rules Always have a plan and always trade that plan! After your decide on a stock you are going to trade...via fundamental analysis, technical analysis, sentiment/momentum analysis or any combination of the above, make sure you do the following...ALWAYS: 1- Always do your own due diligence, be responsible for your own trades/investments. Don't just trust tips check them out. 2- Have a entry point or a trading system entry signal. 3- Have a profit point or a trading system exit signal. 4- Have a stop loss (always mental if you can be there to watch the trade) 5- If your stop loss is reached, always close the trade ASAP, always. Commissions are just too cheap not to. You can always re-asses see rule #8. 6- Once the trade begins to move in a profitable direction tighten up your stop loss and trail it behind the win. If during the run your trailing stop loss is reached, close the trade ASAP, always. 7- Once your profit point or exit signal is reached, take your profits. No one ever went broke taking profits. However, if you are not using a trading system and you decide to ride the win, be sure and stick to rule #6. 8- After you close any trade as a winner or looser and you determine the stock is tradable again, start the process over. 9- If you have traded a stock three times and each has been a loosing trade, find another stock to trade. You can't read them all. Never try to get even with a stock, move on and find one you can win with. Those are my NINE Trading Rules...simple but they work for me...<g>

To: Time Traveler who wrote (3814)	9/12/1999 11:32:00 AM
From: Rick Faurot	Respond to of 18137

I agree with both funk and Eric. I'd recommend starting with a $10k account. This should be money that you can kiss goodbye right from the getgo. Your odds of losing most of it are extremely high and by keeping your starting amount small, you'll feel your back against the wall much sooner and thus limit your overall losses dramatically. Eric makes another very good point which I have stressed previously myself: don't start out trying to make money. May sound paradoxical, but the reality is you have SO much to learn that the practical goal is to stay even as you do real trades. Just learning to keep a stop loss alone is a discipline you should focus tremendous attention on. I have done zillions of trades where I stopped out for a 1/16 or an 1/8. Do I begrudge when I see other traders averaging down for multiple points and then pulling out a profit on a trade? Heck no! Because I'm a beginner and I can only learn if I can survive. Eventually I'll get it right by being patient, studying hard every day--and keeping a tight stop!! best of luck with your trading :-) Rick