but today is the day to learn ... and learn ... and learn ...
Your capital is the most precious possession you have, and your job is to protect it ... with out capital there is no trading ... I have a terrible time understanding what the fuss over daytrading is all about. There really isn't anything new in day trading ... it is what makes the market work. Some one day trades every day otherwise there would be no volume. The difference as I see it is that individuals are now trading their own accounts every day, not just institutions, brokers, brokerage firms or individuals who manage their own large accounts. And there are so few individual daytraders, an estimated 15,000 to 20,000. Now when you are talking about billions of shares being traded every day ... these few day traders seem like a very tiny percent of the trades. So what in the world is all the fuss about. There are as many ways to day trade as there are ways to trade in general. As far as I know there are no stead and fast rules. Just visit a variety of day trading sites and you will see a variety of ways to trade. The only common ground that I can think of is that day traders trade equities during a market day which can range from premarket, through market hours and then into aftermarket. They do not use on line brokers ... they use a variety of tools including, but not limited to: broker execution programs, streaming charts, Level II and sometimes Level III NASDAQ and a variety of indicators to buy and sell directly through the ecn's ... just like a brokerage firm. It matters not if it is a bull or bear market, whether the stocks are bought long or sold short ... whether they scalp, trade rangers, postion or swing trade, hold or not hold overnight. As far as I know there is no right or wrong way to day trade. There are some SEC rules that may come into play with the different techniques but every technique seems to be employed by different types of traders. I think the most important part of day trading is the knowledge, understanding and use of the indicators that are commonly used in day trading, which are not different from any indicator used in all types of trading. okay ... so let's talk a little bit about indicators ... however there are so many great sites and books available that for me to teach the use of indicators would just be an exercise in re-inventing the wheel. What i will attempt to do here is a simple introduction to the few I know and help you locate sites and books to continue your education in the use and reading of common indicators.
there are over 500 indicators to choose from ... and ... ah ... I don't know what all 500 are ... so I will work
with the ones I know and use and have come to love. Do you know what the Bollinger Bands are? well ... Bollinger Bands are envelopes which surround the price bars (candlesticks) on a chart and help measure the volatility of a stock. They widen during volatile market periods and contract during less volatile periods. John Bollinger developed this indicator based on the 20-day moving average. It is the mathmatical average of the previous 20 days of data. The volitility for the same 20 days is the variation of the same data measured by the standard deviation of the data from the average. Bollinger created several rules which might indicate a price move. They are: 1) ���� Sharp moves in price tend to occur after the Bands tighten, and the closer to the average the better. Since reduced volatility denotes a period of consolidation, the first increase in volatility after a consolidation tends to mark the start of the next move. 2) ���� Moving outside the Bands signals a continuation of the move until the price drops below or inside of the Bands. ����� 3) ���� Moves starting at one Band tend to go to the opposite Band. Consider using Bollinger Bands with other indicators to help confirm trends. Remember ... the trend is your friend until it bends.
Okay ... now for ... Breakouts Breakouts can be some of the most exciting and rewarding plays, but you must be very selective in choosing them. Properly identified and played, breakouts can offer great profits within one to seven trading sessions in a swing or position trade. In a breakout look for two main criteria: 1) Stocks making a 50-day high (50 day low for the bearish play) 2) Stocks where today's trading range is greater than or equal to the largest (high to low) of the past nine trading sessions. The only remaining criteria are that the stock continues its upward (or downward for the bearish play) trend in the next trading session ... if it does, that's when it is time to consider a position. And as with many other plays, you can also play options on Breakouts as well as the underlying stock. Reasons for Breakouts Things in motion tend to stay in motion I will continue working on this page and indicators as time goes on ... but I think it is likely to be an on-going project ... in the mean time ... check out the Stock Charts link on the right ------------> then head to chart school, it is a very good place to learn.
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