The Truth About Day Trading Stocks: A Cautionary Tale About Hard Challenges and What It Takes To Succeed

Preface xiii

Acknowledgments xvii

Introduction: The Wholehearted Amateur 1

PART I Psychological Truths and What to Do about Them 5

CHAPTER 1 Truths about Yourself to Know First 7

How Often Do You Trade, and How Profitably? 10

How Much Are You Trading in Capital and Leverage? 10

How Long Have You Been Trading? 12

What Financial Instruments Are You Trading? 13

Are You Trading Other Peoples’ Money or Your Personal Capital? 13

Are You a Licensed Trader, or Trading Independently? 13

How Were You Trained? 14

Rules to Remember 14

CHAPTER 2 How Emotions Can Destroy a Trade 15

The Fear Factor 16

Greed Is Not Good 18

Rules to Remember 21

CHAPTER 3 Preventing Overconfidence 23

Ignoring Your Predetermined Stop/Loss Price 24

Holding Too Long 24

Rules to Remember 26

CHAPTER 4 From Impatient to Cool, Calm, and Collected 27

The Waiting Is the Hardest Part 29

Deciding to Learn More 31

Rules to Remember 33

CHAPTER 5 Taking Breaks 35

Break When Your Confidence Is Low 38

Break Because It’s Just Not Working 38

Break and Then What? 39

Rules to Remember 42

PART II The Truth about Your Risk 43

CHAPTER 6 The Importance of Risk Management 45

The Amount of Trading Capital Allocated to Each Trade 46

The Timing for Allocating Capital to a Trade 47

Overexposure to Risk 48

The Stock or Company You’re Trading 49

The Time of Day You’re Trading 49

Gambling 50

Rules to Remember 51

CHAPTER 7 Why Overexposure to the Market Can Hurt 53

Time versus Timing 54

Rules to Remember 58

CHAPTER 8 Budgeting: Knowing Your Financial Limitations 59

Don’t Quit Your Day Job: Catch-22 60

Crunching the Numbers 62

Cushion Cash 63

Rules to Remember 64

CHAPTER 9 Minimizing Your Risk with Stop/Loss 65

Making Stop/Loss Automatic 65

Rules to Remember 71

CHAPTER 10 Averaging-Down: A Skilled Strategy 73

To Average-Down Successfully Takes Mastery 74

Know-How Doesn’t Grow Overnight 75

Rules to Remember 77

CHAPTER 11 Gambling versus Day Trading 79

Rules to Remember 82

PART III Intraday Trading Truths 83

CHAPTER 12 Why Some Traders Make

More Mistakes 85

Pick Your Stocks Carefully 86

Focus, Focus, Focus 87

Pay Attention to Market-Moving News 90

Rules to Remember 91

CHAPTER 13 Trading Consistently All Day 93

Rules to Remember 98

CHAPTER 14 Stock Picking: Simplifying the Process 99

Your Stock Should Have an Average Daily Volume of One Million Shares or More 100

Choose Stocks between $10 and $100 101

Pick Stocks That Display Tradable Intraday Price Swings 102

Don’t Trade Stocks Affected by Strict Federal Regulations 102

Beware of Stocks Directly Affected by Current News Headlines 104

Rules to Remember 105

CHAPTER 15 Why News Can Be Just Noise 107

Trading on News versus Monitoring News 109

Rules to Remember 111

PART IV The Truth about Training and Preparation 113

CHAPTER 16 About Those Training Programs 115

Seminars for the Greenhorns 116

Training Programs for the More Experienced Trader 119

Tips for Selecting the Right Program 120

Rules to Remember 123

CHAPTER 17 Picking the Right Online Broker: Pay-per-Share versus Pay-per-Trade 125

Starting Out with Pay-per-Trade 125

Transitioning to Pay-per-Share 126

High Leverage Pros and Cons 130

Hang on to Your Pay-per-Trade Account 131

Rules to Remember 132

CHAPTER 18 Paper-Trading Strategy 133

Paper Trading for the Amateur 134

A Word about Advanced Paper Trading 139

Rules to Remember 140

CHAPTER 19 Trading for Skill versus Trading for Income 141

Building a Foundation of Trading Skills 141

First Level 144

Second Level 146

Third Level 147

Summary 148

Rules to Remember 150

CHAPTER 20 The Perfect Trading Day 151

Early Morning Activities 151

Pre-market Trading 153

The Opening Bell 156

Midday Activities 157

The Last Hour of Trading 159

The Closing Bell 160

After-Market Trading 160

Homework 161

CHAPTER 21 The Worst Trading Day 163

Early Morning Activities 163

Premarket Trading 164

The Opening Bell 166

Midday Activities 166

Last Hour of Trading 167

The Closing Bell 168

After-Market Trading 168

Homework 169

Conclusion: Parting Words 171

Appendix: Rules to Remember 175

About the Author 181

Index 183

CHAPTER 2 How Emotions Can Destroy a Trade.

The Fear Factor.

Greed Is Not Good.

Rules to Remember.

CHAPTER 3 Preventing Overconfidence.

Ignoring Your Predetermined Stop/Loss Price.

Holding Too Long.

Rules to Remember.

CHAPTER 4 From Impatient to Cool, Calm, and Collected.

The Waiting is the Hardest Part.

Deciding to Learn More.

Rules to Remember.

CHAPTER 5 Taking Breaks.

Break When Your Confidence is Low.

Break Because It's Just Not Working.

Break and Then What?

Rules to Remember.

PART II The Truth About Your Risk.

CHAPTER 6 The Importance of Risk Management.

The Amount of Trading Capital Allocated to Each Trade.

The Timing for Allocating Capital to a Trade.

Overexposure to Risk.

The Stock or Company You'Re Trading.

The Time of Day You're Trading.

Gambling.

Rules to Remember.

CHAPTER 7 Why Overexposure to the Market Can Hurt.

Time versus Timing.

Rules to Remember.

CHAPTER 8 Budgeting: Knowing Your Financial Limitations.

Don't Quit Your Day Job: Catch-22.

Crunching the Numbers.

Cushion Cash.

Rules to Remember.

CHAPTER 9 Minimizing Your Risk with Stop/Loss.

Making Stop/Loss Automatic.

Rules to Remember.

CHAPTER 10 Averaging-Down: A Skilled Strategy.

To Average-Down Successfully Takes Mastery.

Know-How Doesn't Grow Overnight.

Rules to Remember.

CHAPTER 11 Gambling versus Day Trading.

Rules to Remember.

PART III Intraday Trading Truths.

CHAPTER 12 Why Some Traders Make More Mistakes.

Pick Your Stocks Carefully.

Focus, Focus, Focus.

Pay Attention to Market-Moving News.

Rules to Remember.

CHAPTER 13 Trading Consistently All Day.

Rules to Remember.

CHAPTER 14 Stock Picking: Simplifying the Process.

Your Stock Should Have an Average Daily Volume of One Million Shares or More.

Choose Stocks between $10 and $100.

Pick Stocks That Display Tradable Intraday Price Swings.

Don't Trade Stocks Affected by Strict Federal Regulations.

Beware of Stocks Directly Affected by Current News Headlines.

Rules to Remember.

CHAPTER 15 Why News Can Be Just Noise.

Trading on News versus Monitoring News.

Rules to Remember.

PART IV The Truth About Training and Preparation.

CHAPTER 16 About Those Training Programs.

Seminars for the Greenhorns.

Training Programs for the More Experienced Trader.

Tips for Selecting the Right Program.

Rules to Remember.

CHAPTER 17 Picking the Right Online Broker: Pay-per-Share versus Pay-per-Trade.

Starting Out with Pay-per-Trade.

Transitioning to Pay-per-Share.

High Leverage Pros and Cons.

Hang on to Your Pay-Per-Trade Account.

Rules to Remember.

CHAPTER 18 Paper-Trading Strategy.

Paper Trading for the Amateur.

A Word About Advanced Paper Trading.

Rules to Remember.

CHAPTER 19 Trading for Skill versus Trading for Income.

Building a Foundation of Trading Skills.

First Level.

Second Level.

Third Level.

Summary.

Rules to Remember.

CHAPTER 20 The Perfect Trading Day.

Early Morning Activities.

Pre-Market Trading.

The Opening Bell.

Midday Activities.

The Last Hour of Trading.

The Closing Bell.

After-Market Trading.

Homework.

CHAPTER 21 The Worst Trading Day.

Early Morning Activities.

Premarket Trading.

The Opening Bell.

Mid-Day Activities.

Last Hour of Trading.

The Closing Bell.

After-Market Trading.

Homework.

Conclusion: Parting Words.

Appendix: Rules to Remember.

About the Author.

Index.