Archive for April, 2008

day trading: trading with urgency

When day trading for a living it is crucial you understand that you are trading for the month, NOT by the hour. You are not trading time for money with the job market, you are using skills to earn money from the stock market.

It is imperative that you get out of your head the result of any one particular trade. If you manage risk properly (translation: keep small losses small) and internalize the fact that your number one job is to preserve capital for the opportunities that “line up” so you can build a position as it moves in your favor.

GET OVER TRADING TO BE RIGHT! GET OVER IT NOW OR YOU WILL NEVER MAKE IT AS PROFITABLE TRADER. Your job as a trader is to manage risk. Taking losses is a HUGE part of the business. Get comfortable with it.

Whats the big deal about taking a bunch of small losses? Stop whining your timing is off! Small loss, small loss, small profit, then one big trade. thats the reality of trading.  Keep yourself in the game while you are gaining experience. Thats how a professional makes a living. Anyone who tells you they always make money is lying. Trade with a sense of urgency while managing your losses. Trade as if you must pay your bills from the first month of trading profits, that means trying to NET money. That means preserving capital.

Preserving capital is not trading scared. It is smart business. The market offers abundant opportunity for you to make a wonderful living as a trader, your job is to make sure you are in the game long enough to gain experience and an understanding of those opportunities to increase leverage.

day trading: taking whats available

It would be great if every day was a “buy at the low of the day and sell at the high 6.5 hours later or sell short at the high and cover near the low” type of day. Unfortunately that is just not reality. The market as a whole has been basically in a trading range since the beginning of the year (yes I know you can point to one or two commodity or oil related sectors).

As a trader who actually earns a living from the markets you should know if you are trading for short term moves or waiting patiently for an obvious trend to develop where you can build a position and hold it for a few hours or days. It is difficult to switch from one to the other on the fly. You can’t be a power hitter and a singles hitter, it doesn’t work that way.

However if the trend or better put, lack of trend is persistent over a prolonged period of time you may have to adjust to taking what the market is offering. During a trending evironment you should be trading less shares expecting volatility which means you will need to give your stocks some room to breath for the “bigger move.”

During a range bound environment you should be trading more shares per trade for a smaller move with very well defined stop loss areas, there will be no working an order. This may not suit your personality to trade these smaller moves, thats fine but remember you will need to be very patient waiting for a trend. You can take what the market is giving or sit back and wait for the conditions to match your trading plan.