Day Trading Skills

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Day Trading Skills

By: Malcolm E Robinson

I received an email from a prospective client. His question caused me to think about the wisdom of pursuing trading as a worthy venture. I know that a lot of readers are investors rather than traders, but regardless of your trading horizons, the skills and concerns of active short-term trading are relevant to us all.

Question: "There are a lot of people who say that day trading is for 'fools' and that it is very difficult to make a living from Day Trading. What are your opinions?"

Trading is like most business: it requires commitment and perseverance. It is never easy to make money, but people who have mastered a skill make it appear easy. The really successful pit traders that I have known made trading look very easy, tantalisingly easy; but they all had many years of experience behind them. For every successful trader there has probably been a few hundred who have tried and failed.

Two core skills

I think people fail at any business if they approach it without an appreciation and understanding of what is required for success. The majority of traders fail, because they have no such appreciation and they have unrealistic expectations of themselves. Any trader who starts with the expectation of becoming an instant success is setting himself up for failure.

No one would decide to become a golf pro and assume that they could just pick up a bag of clubs and start winning tournaments. Yet novice traders do this all the time. Just to start with the understanding that trading is a skill that is developed over time, through experience, puts a novice trader way ahead of the competition.

There are two core skills in trading: first the ability to anticipate the market (read the market) and second, having the discipline to execute your plan. To learn to read the market you may as well use a trading simulator and only start to trade when you have demonstrated to yourself that you can anticipate the market. Discipline, though, has to be developed and tested in the real world.

Stick to your own rules

Discipline is really the crux of the matter and it is here that most traders fall down. Their failure is mainly due to the fact that they are not really aware of its importance. Just starting out as a trader with the intention of developing your discipline puts you way ahead of the average trader. If you can trade with discipline (i.e. stick to your own rules and limits) you are 95% there!

So I would say that for the average aspiring trader, trading is a fool's game; but for those of us who approach the business as a business, with a clear understanding of the unique challenges that trading offers, it is a rewarding and fulfilling career.

About The Author

Malcolm Robinson is a former LIFFE floor trader who now trades his own account as well as providing educational material for futures traders.

http://www.online-day-trading-emini-futures.com/

http://www.instinctivetrader.com/

Comments

jdaugherty3 06.07.2010. 14:29

Best way to learn day trading from home? How do you learn how to day trade from home? I want to trade for a living from my house. I know it is possible. What are the best books to read and what are the best websites to use? Thanks!
Maybe I should rephrase that, "swing trade" or short term trades, is what I mean.

jdaugherty3

Admin 06.07.2010. 14:29

I day trade frequently.

It is a commonly held misconception that you can learn to day trade via published materials. This is why most day traders lose their money and defensively complain about market manipulation. Periodicals abound on the subject because there's money to be made putting out nonsensical reading materials, all of which purport to prepare the buyers of such materials for an unlimited earnings career. It is absurd, to say the least. And some Internet pitches go so far as to spiel a half page of utter nonsense such as you'll find on this page from another responder.

There is just one way to become a profit-oriented day trader:

Pick a bunch of stocks that show decent volatility and get to know them as well as you do your own face. This means track every last news item out there on each pick. Track the volume changes throughout the day, hour by hour and more if your lifestyle permits. Log into a journal the opening bids, the last price of the closing trade and highs + lows of each trading day for each stock pick.

When the market opens in the morning, you must be able to see in an instant where the opening bid sits and recognize the difference from the previous close. Decisions to buy or sell or maintain positions must be quick as a flash.

Day trading is most profitable when you see the news unfolding and know the trading ranges well enough to anticipate trend reversals. Then it's a matter of your ability to relate to momentum within the confines of trading and incorporate this with an intimate view of volumetric changes.

For day trading to succeed, you need an account balance of $25K along with the aforementioned Information. You also need excellent math-on-a-dime skills plus strong instincts so that you can successfully anticipate how the general public will respond to unfolding news affecting your picks.

This is a difficult process for sure but it keeps me on my toes every minute of every day. For relief from the tension, I respond to questions here and also do lots push ups and stationary bike riding, anything just to relieve tension and provide a healthful outlet for nervous energy.

Whatever you decide to do, understand this is a journey that tries the quickest minds and calls for great instincts. Along with day trades, I also hold positions in some longer-held picks that pay high quarterly yields, as financial protection. And I do a lot of swing trades where I will regularly buy and sell stocks I've had for anything from a few days to a couple of months.

You might visit www.investorshub.com and examine the home page where there's a list of most popular day trade vehicles. I would never recommend trusting anything there but at least you'll be introduced to picks being promoted by very active traders.

Good luck to you!

Len

Admin

kichapo_cha_kweli 23.10.2008. 22:20

what is the difference between day trading and long term trading? Between day trading and long term trading, which one is the better choice for a begginner with $700 to invest?

kichapo_cha_kweli

Admin 23.10.2008. 22:20

here is a rule of thumb. unless you are the lucky .05% of all people who have "the gift", your "luck" or "skill" usually has to do with if the market is going up or not. rising tides lift all boats.

generally, the more you trade the more commissions will eat up your account, and the more margin for mistakes you will have. also, you are usually buying the offer and selling the bid if you are not making a market, and all this adds up with the number of transactions.

i'm not saying you can't do it, but you have a much better chance in long term investing. read "one up on wall street" by peter lynch. you can outperform the market, but be smart and prudent.

if you feel like you are gambling, you probably are. guess what? gamblers almost always die poor, it is an almost certain event. don't take my word for it, research it.

i assure you if it was as easy as it seems nobody would be working for a living. when i was trading 15 years ago, of the five hundred or so guys who were doing it with me, two still do it. two. most of the ones who are still there are - you guessed it - brokers not traders who make commission no matter who wins and loses.

and read Jesse Livermore: Reminiscences of a Stock Operator

trading is a much smarter venture if you are using someone elses money and you get a nice cut of the profits, but only lose your job and not your capital if you lose big.

Admin

Michael J 04.01.2010. 05:40

Where can i find some day trading tips? im looking to get into day trading but dont know where to start, i need a good site with some free guides for beginners.

Michael J

Admin 04.01.2010. 05:40

There's no such thing as "day trading tips". There are web sites that will tell you what may be in play..... then it's up to you to use your "technical analysis" skills to know when to enter and when to exit. Even if they give you these parameters.... You should still have the knowledge to protect yourself.

A good "day trader" only gets 40% - 55% of their trades correct. I'm right in the middele @ 50%. The real skill is "trading money management" including position sizing.

Here are two great swing trading services that also day trade;
http://tradesetups.com/
http://www.alphatrends.net/

Also check out;
StockTwits.com

Admin

Joil Peera 02.06.2011. 04:15

What is day trading ? If I invest i it what are my chances of gaining profit on it .? I wanna invest in day trading in Thailand . So I wanna know whether or not I have any chance of gaining some profit .

Joil Peera

Admin 02.06.2011. 04:15

Day traders do exactly that... they trade something (stocks, bonds, options, Forex, futures etc). The trade is open for less than one session or 24 hours (which ever is less).

The vast amount of people that try day trading fail. 95% fail before one year.... most fail in a matter of months. For those that succeed..... the average time to do so is 3-5 years.

Day Trading can be very rewarding.... both financially & emotionally. The key skills, in order of importance are a knowledge of;
Trader psychology (yours & the markets)
Trader money management
Technical Analysis

Read some books. Take 6-12 months before you even open a brokerage account.

Admin

John 02.11.2012. 14:46

What are the best types of stocks to day trade? Emerging markets? Small cap? High cap? Financials? Consumer staples? High volume? Low volume? Some other category? I trade mainly based on technical analysis, while still taking macro factors into account. And before you lecture me about the risks of day trading, I'm only doing this on a simulation account for now.

Thank you

John

Admin 02.11.2012. 14:46

Liquidity and volume are paramount.

For day trading, you need a stock with a wide range during the day, usually a high beta stock that moves more than others during the day. If a stock has a range of greater than 1.5 points per day, over several days, it may be of interest as a quick trade.

The big three right now are AAPL, GOOG, and AMZN.

Financials are the most watched and most heavily traded sector of the market and are consistently daily volume leaders on the NYSE. Day traders love them because they're much more volatile than other large cap stocks, and they're extremely liquid.

Large cap financials are also generally considered bellwethers of the market, as they often lead market rallies and crashes. Some examples include BAC, C, GS, MS, and JPM.

Besides financials, large cap high growth tech stocks are also widely used for trading, such as AAPL, AMZN, RIMM, GOOG, BIDU, etc., again because they're very volatile.

Also, companies in the spotlight are popular among day traders.

And finally, index ETFs, SPY, QQQQ, XLF, EEM; commodity ETFs, GLD, USO; and leveraged ETFs, such as FAS. Also triple weighted ETF's like TNA .... however you can't use daytrading margin on triple weighted ETF's ..... so it's really about what your tolerance for risk is not that one stock is really better than another, in which case, you should have excellent skills at risk management.

There are also the news events, like gov't reports, earnings releases, and individual company releases like pharmaceuticals being approved.

Admin

G 11.05.2010. 18:37

Is day trading as simple as watching stock rise and fall thought out the day? Probably sounds like a dumb question, but is there any rhyme or reason to day trading, or is it simply watching upward and downward trends on a daily basis.

Is it as simple as taking 300 bucks a day plugging it into the market and seeing what happens?
Could you day trade on couple hundred dollars?

**please dont leave a spam response**

G

Admin 11.05.2010. 18:37

The simple answer is no. Day trading is a difficult profession that can require years to perfect. I've been investing for 30+ years. Five years ago I started swing trading (holding a stock from 1 to 30 days.... sometimes, for me as long as a couple of months). I started day trading early in 2009.

There are two distinct skills needed;
Technical Analysis
Trading Money Management

You can't be successful at day trading without some expertise in both.

On average 95% of those that try to day trade give up.... or lose their account. Usually in a short period of time. Some people succeed relatively soon (very few)..... most take 3-5 years.

I'm pretty typical. I'm reading a new trading book every month... or re-reading one. I take weekly webinars regularly. My broker does 1-2 every week. One of them (Monday's) is solely on trading psychology.

Discipline, patience, having a plan (sticking to it) & plenty of trading education are the basic requirements

Here's some of the web traders I follow;
http://www.alphatrends.net/
http://leighdrogen.com/
http://joefahmy.com/
http://www.howardlindzon.com/
http://www.slopeofhope.com/
https://www.thinkorswim.com/tos/displayPage.tos?webpage=onlineSeminar

I hope this answers your question. Trading becomes a passion. But the hours you have to put in every day can be exhausting.

Admin

CS 29.02.2012. 03:22

How is day trading different? ...from an online discount stock brokerage like ETrade. How is it different from from holding on to your stocks for a longer period of time. Do trades cost more money? Rather, can you day trade on ETrade's platform? Please enlighten a noob, I know absolutely nothing about this field.
Any recommended books?

CS

Admin 29.02.2012. 03:22

I recommend day trading only if you have a substantial amount of money to invest. Reason: If you wish to day trade using on online investment site then u are looking at a fee for every trade you make. So if you don't have much money invested then you may find yourself spending more money trading than you are actually making. You want to make day trading worth the time and have a good amount of money to work with. Only difference with day trading is that you are making trades much more often. The idea is to buy a stock low and sell it high as fast as you can before it falls again. But there is nothing wrong with long term trades and again, with a good amount of money a long term trade can pay off very well. You just have to find good companies to invest in. Day trading does take skill! So be careful if you do.

Admin

understress 26.04.2009. 15:50

Are train 4 trade skills able to certifiy a City & Guilds certificate in Plumbing NSVQ? If I spend 3,900 with train 4 trade skills and finnish the course has any body got the right certificate of city & Guilds. As reported on the Unite union web site as to beware of fast track pluming courses. Please help as i have just 20 day for to recover my money if they are not a reputable company!

understress

Admin 26.04.2009. 15:50

1st of all city and guilds no longer exist!

you can only become a fully qualified plumber by doing a 4 year apprenticeship (3 for adult) in which u must have an employer. your unlikely to get a job before a qualified plumber if you sat a plumbing course as my gran could do that course!

Admin

Ready2Rock 16.01.2009. 16:50

What software can you recommend for an amateur day trader that is focused on Technical Analysis? ? Can Day Trading be a hobby, or does it need to be a full time job? I have been educated on technical analysis, but it has been some years since then. Now that I have the means to get involved in the markets, I am limited on time. I have been brushing up on my TA skills and knowledge but I am curios as to which are the best tools, software and vendor to trade with. Thank you in advance fr your answers.

Ready2Rock

Admin 16.01.2009. 16:50

i like
metastock

Admin

Theresa 29.11.2012. 23:05

What would be a good trade/skill for an American to pick up to work in Canada? So I've been looking into ways to get my boyfriend to come over to Canada to work while I finish school, and the best thing for him to do is to have a trade that's in demand in Canada, right? If so, what would be a good trade/skill for him to pick up that will guarantee him employment and a work permit? Something that's not going to take YEARS to accomplish and something that's needed in Canada. :)

Theresa

Admin 29.11.2012. 23:05

A need with a reasonably high probability of getting an employment visa these days is for bf to earn bachelors & masters from an internationally recognized school of mines. The alternative is degrees in petroleum engineering. Next best is BSN, preferably MSN, in nursing.

Without university degrees plus experience, it's becoming more difficult to find jobs with employment visas in Canada. Employers must first prove there are no Canadians qualified and available for the job, even before they can file for employment visa. They have to be pretty desperate for a very high-end worker to spend that kind of time, money & hassle.

Nothing else is going to come close to some probability of obtaining employment visa. Even mining or petroleum engineer with Arctic mining/drilling expertise is not guaranteed. Worldwide labor glut of a billion people, so competition for jobs abroad with employment visas is ridiculously hard and getting harder.

Admin

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