Day Trading - Daytrading - not High Frequency Trading
Day Trading – Daytrading STOCK
What is day trading? For us day trading is about buying and selling a stock within the same day (9:30am – 4pm EST, not 8am-9:30am, not 4pm-8pm.
While daytrading, day traders seek to make profits by margin leveraging (4X) capital (say $50K to $100K+ X 4 gives you $100K to $400K buying power – accelerates or magnifies gains or losses on your base capital) to take advantage of price movements in liquid stocks, usually stocks that are shortable, meaning available from your broker with a $5.00 stock price minimum.
Below you will find the traditional answers to that question - what is day tradig?
The more important questions I hear from investors, swing trading and day trading traders are:
"John, as an active day trader, what makes you style of day trading so different from all the others?"
"As you day trade, why are your day trades so profitable?
I'll answer both questions, but first let me point out that we only (my clients and I, in our day trading room) only trade stocks.
Why do you only day trade stocks?
First about the Winners and the Losers - the 2% and the 98% of all traders around the world, by my estimate.
The 2%, smart money has sophisticated software, designed and continuously redesigned, to gather world-wide investor, swing trader and day trader information. This information includes both market and limit offers to purchase long or go short; market, stop limit, and trailing stop limit orders; and all the various exit orders that have yet to activate.
They use use this info to make surprise tactical decisions and their day trading rules of the new game being played to move both market indexes and certain stock prices, all financial instrument prices, for that matter, in any direction that suits them for their advantage - to the distinct disadvantage to 98% of all the other traers in the world - all those day trading for a living.
The dreadful results for those learning how to day trade stocks - learning the hard way, actually, only learning to lose, not learning to win, day trading Old-school.
When does this occur?
Applying their propriatary day trading rules, these consistently (big money) winning day traders act when the vast majority of traders least expect it - what I refer to as Smart Money TRICKERY - getting in for the KILL and out taking their profits in a matter of minutes.
I'm not referring to program or high frequency trading. I'm talking about trading that comes from Trickster Analysis - just like investors rely on company innovation, net income and management ( fundamental analysis), and day traders rely on charts (technical analysis).
Our Trading POWER Learning program focuses on taking advantage of this smart money trickery with our day trading strategies with a focus on Day Trading Stock.
What is Day Trading? How To Day Trade Stocks?
Researching with Google Adwords tools for day trading information, info on how to solve problems about day trading stocks, day trading rules, and to garner a few hot day trading tips and conduct research on what is day trading, day trade issues, how to day trade stocks - generates the following important areas of concern for all traders: day trading, day trading rules that apply to a pattern day trader, how to day trade, what's to be expected daytrading as a day trader every trading day.
A day trader search gave us - trader day, the day trader, how to be a day trader, be a day trader, what is a day trader.
And a day trade search produced - day trade, daytrade, trade day, how to day trade, and how to trade stocks.
Search activity seems to vary between those who want to know, the what is questions and how do I do something better questions - make a lot of money day trading stocks, for example. Then ther are those that want the latest day trading tips and what's need to be a pattern day trader, a day trader.
Below I will talk about the "dictionary" sites; and there are all the stock brokerage websites that want you to open accounts with them; and then you have endless sites that involve anything but day trading, mostly stock broker sites, swing trading and investing related websites, then everything in between that too often prove useless for finding real answers to real questions.
What I'm going to share with you on this site is about day trading new-school and is not available anywhere else on the web that I know of.
Why?
Because most so-called day trading gurus (offering how to day trading courses, books, CDs, software, daytrading picks of the day on their day trading, day trade sites and the investor, swing trading, and day trader paying for their wares) are talking, teaching, day trading old-school, whereas we've discovered where the real money lies, daytrading new-school as you now know from reading other pages on this site.
Summary - Day Trading New School:
New daytrading Perspective - learning what is day trading to win on the shoulders of big money winners.
New day trading Strategies - Trading with Winners, Focused on Winning, every trading day, not distracted by the money.
New day trading Systems - to bring this all together for trading POWER, that is day trading on your terms, absent the distress, distractions, and big money losses.
And what would mastering the new game of be like without a new set of day trading rules, not many rules, just the right mix for winning.
All originally designed to allow troubled investors, swing traders, and day traders to take the bull by the horns for consistently profitable winning , for wealth building trading day by day.
The Trading POWER Learning program
Our day by day trading goal is to earn $1 - $3 a trade, not $.20 - .50 scalps. We will exit stock trades that no longer "work" (stall or reverse in price), taking whatever gains we can the resulting trade in this case results with scalps.
On rare occasion we will trade a stock that is "not shortable" (your broker does not hold sufficient stock to short). In this situation we will trade long only, as opportunities arise.
Second, our day trading approach prevents holding positions beyond 4pm East Coast (USA). We intend to exit positions well before this time, assuring a fill (with sufficient volume - where other traders buy or short our particular company stock). When volume is missing, we avoid trading the stock in the first place.
You will hear others say below not hold beyond the market close. "The market does not close until 8pm", you say. Yes, that's an additional 4 hours we deem unacceptable as light to no volume presents unacceptable day trade risks.
Typically we will hold a position for less than 3 minutes, as usually that's all it takes for smart money to trick most traders by causing a price reversal, a price extension, a "short squeeze", or a "long squeeze".
Day Trading Trading Day by Day GOOGLE
When you "do a Google" (Google Adwords keyword search) for how to day trading sites, or how do I day trade the terms with the most activity are: day trading, trading day by day, day to day trading, what is day trading, how to day trading, day trading how to, day trade, daytrade, trading day, daytrading, trade day, how do I day trade, and how to day trade.
Searching the word day trading gives results with definition sites, dated, what I call dictionary websites, presents, in my view, and the experience many other traders who talk to me about this, a major problem for visitors it's become a time waster leading to frustration.
Google presents these dictionary sites on the first search page, on top, rather than separating them as such like they do videos and news below the first five organic positions that should be reserved for real help sites.
For most day traders I talk with, this is a nuisance, a distraction a time waster.
I believe investors, swing trader, and day traders want the most relevant, reliable, problem solving websites on a page one search, in the first five spots, right below their Pay Per Click Adwords entries not buried 5-10 deep on the organic portion of a page.
Day Trading Day Trade more INFOBelow I have excerpted definitions from three authority (dictionary) websites for your additional information.
Notice they don't even use the terms: trading day by day, day to day trading, what is day trading, how to day trading, day trading how to, day trade, daytrade, trading day, daytrading, trade day, how do I day trade, and how to day trade.
I do, so you will find what you want on the Web to solve real trading problems - to get your what is day trading questions answered and, as a result, get many of your day trading problems solved. The number one solution for want-to-be-daytraders is to know that, unless certain conditions are met with regard to their financial and emotional capacity - they should not be day trading any financial instrument, in the first place, until they become qualified - both emotionally and financially.
Like any aged reference material, remember that this information below is like any book - dated, thus questionable for accurately and reliably in painting a real-world, real-time picture of what's going on in the stock markets these days what day trading is really all about is likely missing.
From Wikipedia, the free encyclopedia.
http://en.wikipedia.org/wiki/Day_trading.
Day trading
Day trading refers to the practice of buying and selling financial instruments within the same trading day such that all positions are usually closed before the market close for the trading day. Traders that participate in day trading are called active traders or day traders.
Some of the more commonly day-traded financial instruments are stocks, stock options, currencies, and a host of futures contracts such as equity index futures, interest rate futures, and commodity futures.
Day trading used to be an activity exclusive to financial firms and professional investors and speculators. Indeed, many day traders are bank or investment firm employees working as specialists in equity investment and fund management. However, with the advent of electronic trading and margin trading, day trading has become increasingly popular among at-home traders.
Day Trading: An Introduction
The Controversy
Search "day trading" on Google and you will see why there is controversy! The profit potential of day trading is perhaps one of the most debated (and misunderstood) topics on Wall Street. Countless internet scams have capitalized on this confusion by promising enormous returns in a short period. Meanwhile, the media continues to promote this type of trading as a get-rich-quick scheme that always works.
The truth lies somewhere in the middle.
There are those who engage in this type of trading without sufficient knowledge (or some even admittedly for a gambler's high!); however, there are day traders who are able to make a successful living.
Many professional money managers and financial advisors shy away from day trading, arguing that in most cases the reward does not justify the risk.
They often cite that no day trader is world renown, whereas icons like Warren Buffett and Peter Lynch (see The Greatest Investors) are a testament to the success that can be attained by more traditional forms of investing. Conversely, those who do day trade insist there is profit to be made.
They say the success rate is inherently lower as a result of the higher complexity and necessary risk of day trading, combined with all the related scams.
Overall, the street remains divided on the issue. At the very least they agree that day trading is not for everyone and involves significant risks.
Moreover, it demands an in-depth understanding of how the markets work and various strategies for profiting in the short term. Now we'll take a look at the various aspects of day trading.
Characteristics of a Day Trader
This article will focus on professional day traders - that is, those that trade for a living, not simply as a hobby or for a "gambling high".
These traders are typically well-established in the field and have in-depth knowledge of the marketplace.
Here are some of the prerequisites to day trading:
• Knowledge and Experience in the Marketplace
Individuals who attempt to day trade without an understanding of market fundamentals often end up losing money.
• Sufficient Capital
One cannot expect to make money day trading. Day traders use only risk capital, which they can afford to lose.
Not only does this protect them from financial ruin, but it also helps eliminate emotion from their trading.
A large amount of capital is often necessary to capitalize effectively on intra-day price movements.
• A Strategy
A trader needs an edge over the rest of the market.
There are several different strategies that day traders utilize, including: swing trading, arbitrage as well as trading news, among others.
These strategies are refined until they produce consistent profits and effectively limit losses.
• Discipline
A profitable strategy is useless without discipline. Many day traders end up losing a lot of money because they fail to make trades that meet their own criteria.
As they say, "Plan the trade and trade the plan." Success is impossible without discipline.
Day Trading for a Living
There are two primary divisions of professional day traders: those who work alone and/or those who work for a larger institution.
Most day traders who trade for a living work for a large institution. The fact is these people have access to things individual traders could only dream of: a direct line to a dealing desk, large amounts of capital and leverage, expensive analytical software and much more.
These traders are typically the ones looking for easy profits that can be made from arbitrage opportunities and news events.
The resources to which they have access allow them to capitalize on these less risky day trades before individual traders can react.
Individual traders often manage other people's money or simply trade with their own.
Few of them have access to a dealing desk; however, they often have strong ties to a brokerage (due to the large amounts of commission spending) and access to other resources. However, the limited scope of these resources prevents them from competing directly with institutional day traders; instead, they are forced to take more risks.
Individual traders typically day trade using technical analysis and swing trades - combined with some leverage - to generate adequate profits on such small price movements in highly liquid stocks.
Day Trading
Day trading demands access to some of the most complex financial services and instruments in the marketplace.
Day traders require:
• Access to the Trading Desk
This is usually reserved for traders working for larger institutions or those who manage large amounts of money. The dealing desk provides these traders with instantaneous order executions, which can become important, especially when sharp price movements occur. For example, when an acquisition is announced, day traders looking at merger arbitrage can get their orders in before the rest of the market, taking advantage of the price differential.
• Multiple News Sources
In the move "Wall Street" Gordon Gekko says that 'information is the most important commodity when trading'. News provides the majority of opportunities day traders capitalize on, so it is imperative to be the first to know when something big happens. The typical trading room contains access to the Dow Jones Newswire, televisions showing CNBC and other news agencies, as well as software that constantly analyzes various other news sources for important stories.
• Analytical Software
Trading software is an expensive necessity for most day traders. Those who rely on technical indicators or swing trades rely more on software than news. This software typically contains many features, including:
• Automatic pattern recognition - This means that the trading program identifies technical indicators like flags, channels and even more complex indicators like Elliott Wave patterns.
• Genetic and neural applications - These are programs that utilize neural networks and genetic algorithms to perfect trading systems to make more accurate predictions of future price movements. (see Neural Trading: Biological Keys to Profit.)
• Broker integration - Some of these applications even interface directly with the brokerage, which allows for instantaneous and even automatic execution of trades. This is helpful for eliminating emotion from trading and improving execution times.
• Back testing - This allows traders to look at how a certain strategy would have performed in the past in order to predict more accurately how it will perform in the future (although past performance is not always indicative of future results).
Combined these tools provide traders with an edge over the rest of the marketplace.
It is easy to see why, without them, so many inexperienced traders lose money.
Conclusion
Although day trading has become somewhat of a controversial phenomenon, its prevalence is undeniable.
Day traders, both institutional and individual, play an important role in the marketplace by keeping the markets efficient and liquid.
Some argue that individuals should stay away from day trading, while others argue that it is a viable means to profit.
And although it is becoming increasingly popular among inexperienced traders, it should be left primarily to those with the skills and resources needed to succeed.
by Justin Kuepper
http://www.investopedia.com/contributors/default.aspx?id=68
Justin Kuepper has many years of experience in the market as an active trader and a personal retirement accounts manager.
He spent a few years independently building and managing financial portals before obtaining his current position with Accelerized New Media, owner of SECFilings.com, ExecutiveDisclosure.com and other popular financial portals.
Kuepper continues to write on a freelance basis, covering both finance and technology topics.
U.S. Securities and Exchange Commission
http://www.sec.gov/answers/daytrading.htm
Day Trading
Day traders rapidly buy and sell stocks throughout the day in the hope that their stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits. Day trading is extremely risky and can result in substantial financial losses in a very short period of time. If you are a day trader, or are thinking about day trading, read our publication, Day Trading: Your Dollars at Risk. We also have warnings and tips about online trading and day trading. For more information on day trading and the related FINRA margin rules, please read the SEC staff's investor bulletin "Margin Rules for Day Trading."
About.com
http://daytrading.about.com/od/daytradingbasics/a/WhatIsDayTradin.htm
What is Day Trading?
By Adam Milton, About.com Guide
Day trading (and trading in general) is the buying and selling of various financial instruments, such as futures, options, currencies, and stocks, with the goal of making a profit from the difference between the buying price and the selling price. Day trading differs slightly from other styles of trading in that positions are rarely (if ever) held overnight or when the market being traded is closed.
Day trading was originally only available to financial companies (such as banks), because only they had access to the exchanges and market data. But with recent technology such as the Internet, individual traders now have direct access to the same exchanges and market data, and can make the same trades at very low cost.
Trading Styles
There are several different styles of day trading, suited to different day trader personalities. The styles range from short term trading such as scalping where positions are only held for a few seconds or minutes, to longer term swing and position trading where a position may be held throughout the trading day. Most day trading systems have a lot of flexibility, and can have open positions for anywhere from a few minutes to a few hours, depending upon how the trade is doing (whether it is in profit). Some day traders will trade multiple styles, but most traders will choose a single style and only take that type of trade.
Day trading also has different types of trade, such as trend trades, counter-trend trades, and ranging trades. Trend trades are trades in the direction of the current price movement (i.e. buying if the price is moving up), and counter-trend trades are trades against the direction of the current price movement (i.e. selling if the price is moving up). Ranging trades are trades that go back and forth between two prices, and are used when the market is moving sideways. Most day traders will choose a single type of trade, but some traders will take different types, and choose which one to trade depending upon the current condition of the market.
In addition to the style and type of day trading, there are other variances between day traders. Some day traders like to make many trades throughout the trading day, while others prefer to wait for what they consider the best conditions for their trade, and perhaps only make one trade per day. However many trades are made, the trading process that is used, and the desired goal of making a profit, are the same.