Aug 222010

How to Day Trade

Here’s one of the best day trading tips you’ll ever hear: When you make a serious decision to learn day trading, commit yourself to getting an excellent trading education.

Day trading is a profession, and as such, if you’re honestly going to learn to day trade stocks, Forex, futures, commodities or options, you’re going to need the best trading education you can find.

If you’re completely new to trading, I recommend a good, inexpensive book like Day Trading for Dummies. It won’t make you a successful day trader overnight (nothing will do that), but it will give you the basic concepts and vocabulary you need when you pursue a more in-depth education.

If you want to be one of the few who can successful do day trading for a living, then you’ll also need the proper tools: at least one fast computer with multiple monitors, a fast Internet connection, and an excellent broker.

You’ll also need day trading software (a Forex platform, stock trading software, or futures trading charts), to help provide you with trading signals through the use of technical analysis (chart reading).

As you journey through your trading education, you’ll have to decide what type of trading you want to do: Trend trading, swing trading, momentum trading, etc. This takes time as you won’t really know what style fits your personality until you try each of them.

In addition you’ll have to decide which market(s) you’ll want to trade. Do you want to do emini trading, Forex trading or online stock trading.

After getting the basics, you need to learn how to day trade by taking advantage of the study, research, and experience of successful traders who have come before you. You’ll also need to go beyond that to learn a specific trading methodology that has clear, objective rules and money management techniques.

Finally, before you begin trading with real money, you should test your methodology and get used to it by paper trading. Actually that’s an old term. Now there are many software programs available in which you can trade electronically using fake money. They are called “simulators” or your broker may provide a “demo account” that will do this for you.

As you can see, despite a lot of the marketing, learning how to day trade is not something you will do overnight. It is a career that requires a serious education and the commitment of a good amount of time and effort.

Trading is always risky, and there are never any guarantees, but for those who commit to it, learning how to day trade can provide a great income and lifestyle not found in many other professions.

Aug 182010
Learn day trading candlesticks

What causes one bar to end and another to start other than simply time?


Note: Both videos part 1 and 2 are included below.

One of the decisions you must make when you decide to learn day trading and develop your day trading system, is what type of bar interval you want to use on your charts.

Most day trading courses that teach how to day trade, don’t even address this issue. And most day traders assume they are going to use minute-increment bars.

However, the consideration of different types of bars (minute, tick, volume, range, etc.) can make a dramatic difference in the results of your day trading system and should be part of everyone’s trading education, whether you’re a day trader or you employ swing trading.

Technical analysis trading is a visual skill, so rather than write a long article to address this issue, it’s better to provide a mini day trading course on the different types of bar charts in video format.

I offer up these videos which I hope will help you in understanding the different types of bars, and the advantages and disadvantages of each.

Please enjoy the videos and then leave your comments by clicking on the “Responses” link at the top right corner of this post of filling out the form below if it appears there – I cherish your comments!



Aug 132010

Learn Day Trading

Here’s the truth: You won’t learn how to day trade successfully in one day by reading the latest amazing e-book where “all the day trading secrets are revealed!”

If you’re seriously committed to learn day trading, then you must begin by putting aside all foolish expectations. Prepare yourself for a real trading education. Here’s a process that I personally recommend. It roughly reflects my own process, but if I knew then what I know now, I could have saved myself a lot of time!

  1. Start with all the free information you can get. With the advent of the Internet this has become easier than ever and there is a plethora of good (and bad) free trading education online. At first you won’t be able to distinguish the good from the bad, but your goal at this stage is to simply become familiar with the terms and concepts as you learn day trading.
  2. Invest in some good books.
    • For beginners you may want to consider:
      • Day Trading for Dummies by Ann C. Logue
      • Technical Analysis for Dummies by Barbara Rockefeller
    • For those with some day trading experience I recommend:
      • High Probability Trading by Marcel Link
      • The Master Swing Trader by Alan Farley
  3. Invest in an excellent day trading course. While you can learn a lot for free and from books, it should be obvious that professional traders are not going to give away their best material for free (or cheap). Once you have a good grasp on the basics of trading terminology and principles, you’ll need a day trading course that will provide you with a very specific day trading system to use.
    • Of course I recommend my own Top Dog Trading Course because it is the culmination of all the trading education and experience I’ve gathered over the years and distilled it into the most simple, pragmatic trading methodology I know.
  4. Ready … Set … Practice! Just because you have the knowledge and a specific day trading system, doesn’t mean you’ll start making money yet. Trading is a skill, and as such, you’ll have to practice. Don’t try to learn day trading with real money yet! And don’t “paper trade.” Use an electronic simulator where you actually enter and exit trades just like you would if you were really trading … only it will be with fake money. Do this until you’ve SUCCESSFULLY “traded” for 3-6 months.
    • Ask your broker if they provide a simulator or a “demo account” you can use until you’re ready to trade with real money.
    • If your broker doesn’t provide a simulator, I recommend the NinjaTrader Simulator which is available for free.
  5. Show me the money! Time to continue the process of your trading education by now trading with real money. Begin very slowly, using a very small percentage of your trading account. You may want to only risk 1/2% to 2% of your trading account on each trade. Inevitably you’ll find that your results are not as good as when you day traded with pretend money. This can be for several reasons:
    • Your “fills” on a live account can be different than on a simulated account.
    • You’ll find that you become much more emotional when trading real money.
  6. Keep a written log of every trade you make. Just because you’re using the same day trading system as someone else, don’t expect that your results will be the same as theirs. Your execution skills, ability to respond quickly, your risk tolerance and psychological fortitude will vary from other traders.
  7. Use your trading log as feedback to compare against the rules of your day trading system. Analyze where you made mistakes and continually make adjustments until you find consistent success.

Be patient, take your time, and enjoy the process as you learn day trading. There is no short-cut, and there aren’t any guarantees. Be realistic and follow the 7-step process above to increase your odds of being successful.

Do you have questions about trading, or do you have comments on this article or insights you’d like to share with others who want to learn to day trade? Please  leave your comments by clicking on the “Responses” link at the top right corner of this post of filling out the form below if it appears there – I cherish your comments!

Jul 302010

Learning How to Day Trade

Before you learn day trading, it’s important to get a good trading education so you can learn how to day trade knowledgeably, minimize risk, and not be blindsided by unpleasant surprises.

Day trading is defined simply as entering and exit a trade during the same trading day. Thus if you open a trade position after the market opens, and then exit that same position before the market closes, you have made a day trade. For at least one day, you were in fact  a day trader … whether you really know how to day trade profitably or not!

Remaining in a trade for a few days is generally considered “Swing Trading” and is also a viable trading approach, however it exposes you to “overnight risk” – meaning that the market can move dramatically against you while the exchange is closed and you can’t get out of your position.

Here are some basic day trading tips for the beginner (there are more details to these rules are they are subject to change so please consult your broker and do not rely on this information):

  • You need at least $25,000 in your account to consistently day trade stocks.
  • Futures often require only a few thousand dollars for day trading (margin rates can vary by broker).
  • Forex often requires only a few hundred dollars for day trading a “mini” account (there are people actively working to get this amount increased).
  • While leverage allows you to trade with a smaller account, that leverage can work against you also – causing you to lose money faster than in a none-leveraged account.
  • It is extremely unwise to choose a market or broker because they allow you to trade with a small account. Many beginners do this because they don’t have much money, but they still want to trade. They are “under-funded,” a common reason that beginning traders fail.
  • Never, ever trade with money you can’t afford to lose. And remember, with a leveraged account, it is possible to lose more than is in your account!
  • It is not a get-rich-quick exercise. It is inherently risky, and even experienced traders who have been successful, have been known to experience large losses.
  • Day trading does not provide a regular income like a job. It is normal to go through cycles of profits and losses (known as “draw downs”).
  • Trading is deceptively difficult. It is absolutely imperative that you learn how to trade professionally by getting an excellent trading education, take a thorough day trading course (or preferably several), and develop a day trading system that is proven over time and with your own experience, traded on a simulator, before you beginning risking your own money.
  • Most people fail!

Now that I’ve painted a bleak (but realistic) picture on what it takes to learn day trading, why would anyone want to learn how to day trade?

If you are one of the few who puts in the time and effort and finds success, it can be extremely lucrative and provide a wonderful lifestyle of freedom. When you truly learn how to day trade profitably and consistently, it can be fun, rewarding, and provide a lifestyle that most only dream about.

Please leave your comments by clicking on the “Responses” link at the top right corner of this post of filling out the form below if it appears there – I cherish your comments!