spreads Wrote: ------------------------------------------------------- > I really disagree with this advice. I know lots of guys that didn’t make anything in trading and have basically a black hole of time spent not earning income; so try telling your family how this is better than working at mcdonalds over 2-3 years? The Good is that you may make some money but have little transferable skills into other occupations. The Ugly is that you lose a lot of money, have nothing to show for it and would have been far better off had you not even anticipated the notion. I would normally agree, but given the context of the situation he’s talking about trading 2 days a month on his days off. I do disagree that trading has no transferable skills - as with all things, it’s what you make of it. Too many people have the (perhaps well founded) notion that daytraders are unemployed losers who are basically gambling, but that doesn’t have to be the case.
I wouldn’t have the balls to do that, but I’m rooting for you if you are aware of the risks and disadvantages. I have read about techniques, i.e. scalping, order book based stuff (maybe ex-traders around here can comment on that), that can be profitable on an individual level, but they require some up-front investment for technology, significant time and patience, discipline and well…someone needs to teach them to you. With the amount of leverage involved to make it worth it, it can go wrong very fast. But hey, some dudes out there are doing that.
People here are way too skeptical about day trading, which is good, because mostly people burn their finger in day trading. I do day trade to supplement my income, and I did burned my fingers at start. I endorse all suggestions given by Zesty. But if you want advice, I can put up few more tips from my experience so take it with pinch of salt. Firstly, discipline is everything in this game, and faster you make money at start, easier it becomes to break discipline. When people day trade, they go out of realistic projections and in back of their mind they think they can double or triple their money quickly, take highly leveraged bets without much work, because they put up small amount of money and throw their dice. It’s gambling, it’s not day trading, and their nothing worse then developing a habit of trading with indiscipline, it’s just better not to trade if you can’t do it with discipline. Discipline means, you are not going to bet in any circumstance. Most of money I made from day trading comes from very very small profits, 2$, 5$, and in rare cases up to 20-30$, so discipline means you are not going to gamble your money even if the payoff prospects are 2$, discipline keeps your prospects limited but also your losses limited. target on boosting your monthly income by 10-20% not more. Secondly, develop strategies, test them, and then apply those strategies, there’s a limit to what you can do in day trading, you have limited info, limited time, so never take a bet on your gut feeling, stay by the rules you set in your strategy, gut feeling is advised when you are full into the game. Thirdly, first thing on your list should be Capital preservation, whatever happens you need to preserve capital, because you are fiduciary to yourself in day trading. You should not loose more then 10% in one day even in worst case scenario (that happens because you are highly leveraged in day trading), and if that happens lower this limit and slowly work to recover that lost money with safer bets. Last but not the least, trade on technicals. In day trading, you usually have very limited picture of fundamentals, and in one day noises can be much ore significant than fundamental drive. For fundamentals I rely on blogs and internet sources and people who invest by buy-and-hold to get the big picture, never doing fundamental analysis myself. You have to accept it, that you can’t go through fundamentals in detail for large number of stocks, because when you do day trading you should be ready to invest in huge selection of stocks, it’s better to get on trend and make quick money out of it, so it helps when you are ready to long/short anything. How do you get that?, you’ll have to build up a basic database, write some macros, to do this screening for you. But when you get the hang of it, and you become regular, it’s not more then 1-2hr work every night, get your plans ready for next day, and follow discipline, you don’t mess with strategies during the day, unless there’s a market significant macro event, in that case I recommend winding up.
Are you referring to technical analysis? I wouldn’t use that as an absolute, many professional traders did quite well without ever looking at a chart. If you understand price action, you can develop an edge off that alone. The single most important point I can make (should have said it earlier) is that you have to find what style is appropriate for you. A friend of mine that was profitable scaping the emini, just couldn’t get his head around my style of fading (mean reversion) spread trading stocks (even though he had been at this style longer than me)…to me the most obvious and ‘free money’ trades that were sitting there begging to be picked, just didn’t register with him. I couldn’t understand how I could execute trades (round trip) sometime in the premarket at amazing trigger points that other people just didn’t pick up on…not to say his way of thinking was right or wrong, just different. The absolute worst thing you can do in trading is compare yourself to other traders.
Viceroy Wrote: ------------------------------------------------------- > I wouldn’t have the balls to do that, but I’m > rooting for you if you are aware of the risks and > disadvantages. > > I have read about techniques, i.e. scalping, order > book based stuff (maybe ex-traders around here can > comment on that), that can be profitable on an > individual level, but they require some up-front > investment for technology, significant time and > patience, discipline and well…someone needs > to teach them to you. With the amount of leverage > involved to make it worth it, it can go wrong very > fast. > > But hey, some dudes out there are doing that. Right. But the problem is that is it becomes an never-ending arms race and you’ll be competing with some individuals back with some serious, serious capital (physical and financial). A lot of edges will come and go and you have to be prepared to adapt.