Day Trading Strategies for Beginners (Part 2)

Okay, based on the previous post, I promised that I would get into some more specific day trading strategies for beginners, so I plan on making good on that promise with this post. I’m learning more & more that I have to do my best to prevent “diarrhea of the mouth” with these posts, and just stick to the topic at hand. To be honest, that’s probably never really going to happen, because my brain just doesn’t work that way, but I can dream, can’t I? So, in my (somewhat feeble) attempt to stick to the subject, I’m going to go ahead and dive into some specifics where day trading strategies are concerned. I trade and have traded all different types of markets, including stocks, futures, options, and forex, and the one common denominator in all of my trading is that I rely heavily upon price charts. I honestly feel that there’s no other way to go but to use price charts to determine what my trading strategy is going to be. In my humble opinion, if you’re entering into a market, but haven’t taken a look at the price chart, but are only going off of fundamental data and statistics, in my mind you’re flying blind. Most of the time, by the time you actually read the reports or the headlines, whatever “big events” are supposed to shake the makrets have already been factored into the price. This is just a fact of life…most traderst that trade on fundamental data are very much late to the party. Price charts, however, give you the distinct advantage of noticing recurring patterns and trends that many times repeat themselves. It’s a lot like what a meteorologist does; they look at historical data and make a determination of how things are going to be tomorrow based on their historical data, but also mixed with a little bit of how the current conditions are. They don’t’ claim to know the future, and many times are dead wrong (as you will be too sometimes when you trade), but they’ve done a pretty decent job of being able to predict the weather on a fairly reliable basis. There are certain things to look for on a price chart that will help give you “clues” as to what may (and I stress the word “MAY”) be happening next. These “clues” on the price charts are revealed by way of chart patterns. The art of identifying chart patterns is a huge part of the school known as “technical analysis”. If you boil it down to its most essential steps, technical analysis is simply the study of price charts.

There are a lot of different tools and techniques that people use to perform their technical alnalysis, but at the end of the day, just looking at the overall direction of the trend is pretty much all you really need to know. I’m a huge fan of the book “Trend Following” by Michael Covel, and I’m a huge fan of the trading school known as the Turtle Traders. If you ever get a chance to check out those websites, do yourself a favor and do so, because it will revolutionize your perspective on trading. Solid trading is not built on never being wrong; solid trading is built on managing the losses when you are wrong, and absolutely milking your winners for everything you can when you’re right. It may seem funny that I’m a fan of those two books and that general school of methodology, because it normally applies to long-term trading rather than short-term, but I love the discipline that’s involved in their methods. At the end of the day, yes, a day trader’s transaction costs can far outweigh those of a less frequent trader, but using a disciplined approach based on money management and handling losses properly, the day trader can kick tail over a long-term trader any day of the week—just ask Marty Schwarz. He was clocking about $70,000 a day on average using “scalping” methods, which is basically entering and exiting a market at light speed, within seconds of each other, and doing it with multiple contracts to leverage small “blips” that happen during a typical trading day. Okay, before my hand starts cramping, I’m going to sign off on this post, but I have to take a second to look back and see if I stuck true to my word…okay, well, I did introduce the core foundation of all of my personal trading strategies, and that is studying price charts (i.e., technical analysis). I’ll have to go into detail about what happens during the actual trading process in future posts; I’m definitely not going to make any more promises about giving this beautifully packaged set of day trading strategies for beginners until I know that I’ve covered the basics to a decent degree. This is not to say that I won’t skip around and do some things in a non-sequential order…hey, I’m writing how I’m writing, and I hope it’s been useful.

Day Trading Strategies for Beginners

Any discussion about day trading strategies for beginners would be incomplete without mentioning the different types of trades that can be done on an intraday basis. Although I will definitely cover some of the major ones with this post, I know that I can’t ever consider my writings to be “comprehensive” about this topic, because there are tons of different ways to squeeze profits out of the markets on a fairly consistent basis. The problem for most traders is really not an issue of lack of technique, or lack of available trading methodologies, but rather a lack of personal discipline in the implementation of those techniques and methodologies. This unruly beast known as lack of self-discipline has been the ruin of many a trader. In the world of trading (and in day trading especially), the truth of the matter is that the internal aspects of trading really play a significant part in how your trading account balance looks. We would like to believe that maybe it’s just our moving average indicators, or our review of the commitment of traders report or something like that, but at the end of the day, most traders sabotage themselves due to their own negative or self-defeating mentalities. This is something that no trader is exempt from; in a way, your very attitudes about money and how you relate to money will play a part in whether or not you’ll be able to make money in the markets, and even more important, when you make the money, whether or not you’ll be able to KEEP the money. Some traders literally overtrade, and end up losing all of their previous gains. They go through this vicious cycle over and over again, and at the end of the year, they don’t really have any actual profits to show for it. If you look at their brokerage account statements, they’ve had a flurry of activity all year, but at the end of the year, they’ve barely broken even, or even may be sitting with losses. If you think about it, doing something that way is really a total waste of time. You could save yourself a lot of stress and time and just blow your money on slot machines if that’s how things are going to end up. So it would behoove us as traders to spend some time planning and thinking through a definite trading methodology, and also take some self-examination time to find out why you really want to trade in the first place. Some people, believe it or not, don’t even trade because they really want to make money; some people trade for the sheer excitement of it, and this holds true especially in the world of day trading. They’re simply thrill-seeking, and the evidence of this is their lack of operating by a specific trading plan. It’s more about just throwing mud against the wall and seeing what’s gonna stick, and honestly, to many traders, it’s just another form of playing the lottery. So before we can even get into any type of day trading strategies, again I believe it is absolutely vital for us to identify our true motives for trading. Some people may think that this kind of talk is borderline “psycho-babble”, and it may seem like a bunch of psychological hogwash, but the very roots of our behavior towards trading and money itself are oftentimes the subtle and unseen part of us that governs our trading behavior. Think about how many times in your trading career where you added to a losing position in hopes of it miraculously turning around, or how many times you entered a market late due to nothing but the pure hype surrounding the market. Think about how many times you hung on to a position that was obviously (and painfully) losing money, only to see that position just get worse and worse, because you couldn’t stand the thought of being wrong about your market bias. All of these things come into play when dealing with the whole of what it takes to be a day trader, so these things must be dealt with in order to keep them at bay. Until then, it’s almost useless to even consider developing specific day trading strategies; you’ll just end up frustrated, because in a sense, you’ll simply be trying to teach an old dog new tricks. I know I didn’t get into any specific day trading strategies for beginners (or any other strategies, really), but I strongly feel that these types of issues need to be addressed before moving into more specifics. Keep tuning in for more…until then, keep trading.

Day Trading for Beginners (Part 2)

In my previous post I talked about day trading for beginners and how important it is for you to know what you’re getting ginto when you begin day trading. Actually, make that BEFORE you even begin to get into day trading. The thing that I want to focus on with this post is how important it is for you to commit to eduating yourself about trading. Education is the most vital element of your trading career; you should never stop learning, no matter how many years of experience you rack up as a day trader. Gaining a solid trading education will build the confidence in you to really take calculated risks with your trading. But if you’re really more of an “action person” that would rather dive in without properly educating yourself first, you’re going to pay for it with cold hard cash. I can tell you from experience that that’s not the best way to go. Having blown several accounts out already, I believe I’m qualified to tell you that a little patience goes a long way. Whether you trade the stock markets, Forex or the commodtity markets, the basic principles are the same—you’re better off taking your time paper trading for a while & learning the markets before you commit real money to it. Don’t get me wrong, there’s no substitute for real-world experience when it comes to trading, and emotions are totally different when paper trading vs. real money trading, but still it’s a good thing to do just to take time & learn the “personality” of whatever market you’re in. There are many day traders that focus on only one market and do their best to “master” its movements and nuances…that can be advantageous because it helps you to keep from getting distracted and becoming the “jack of all trades but master of none”. I have a trader friend who only trades the E-mini S & P 500 and he kills it on a regular basis. Many traders who adopt the “tunnel vision” style note that you can learn a market’s peak hours and regular movements upon open or close if you stick to studying just that one market. For instance, for a little stint I was day trading Corn, and I noticed that Corn’s volume normally is huge right at the open, and then lulls during the early-to-mid-afternoon time period, and then jumps again within an hour before close. I also learned that if any real move was going to be made, it would happen during the first two hours of market open. I have had instances where I have made $250.00 in a matter of ten minutes just by sliding in & out of Corn. This is definitely not a science, but an art. Some would debate me even saying that about day trading; yes, I agree that it can be standardized and put into neat formulas by very smart people, but I do just fine by keeping it on the “art” side.

Looking back on what I’ve written so far, I realize that I didn’t actually stick to my initial intedned topic which was education for beginner day traders, but hey, you can’t win ‘em all. I’m signing off, but I know that I’ll continue to cover more day trading for beginner topics with some future posts.

Day Trading for Beginners

Well, I’m giving a big shout out to everyone who may be reading this blog…I’m heare to talk about day trading for beginners. One thing that all of us who are currently investing in the stock and commodity markets have in common is the facdt that we all at one time were beginners. There’s hardly anything more intimidating to a newcomer to the markets than the jargon and the terminology and all of the other stuff that makes up the whole base of trading knowledge that you have to have to be able to function in the marketrs. Please forgive my crappy spelling; I can be the world’s worst at proofreading my writings, because honestly I’m not sure if I care enough to go back an fix my mistakes…I actually just want to write what I write as fast as possible…I’ve found that I can type a lot faster when I’m not backpacing every other word to fix it. LOL

A Little Bit About Day Trading

Day trading is not for the faint-hearted. It’s definitely not for the investor that has a gambling or lottery mentality. Yes, you can score big with day trading, but you can also lose a HECK of a lot of money if you’re not careful and conservative with your trading practices. If you hate to be wrong, you’ll really be put through the ringer in the markets, because day trading is not about getting every single trading prediction correct, it’s about two words and two words only: CAPITAL MANAGEMENT. If you can master capital management and learn how to conserve your treading capital, you can absolutely make it in the markets as a day trader.

So What is Day Trading?

Day trading is basically a trading methodology where you enter and exit a trading position on the same day. Some people have had the mistaken notion that day trading means you trade every single day, but that’s just not the case. All it means is that you enter and exit your trade on the same day. “Day trader” doesn’t mean “daily trader”—there is a difference.

As you may or may not be able to tell, day trading takes a lot of discipline, which is why a lot of traders fail. This is not a game for the sloppy investor, or the emotionally-out-of-control trader. Day trading requires you to reign in all those impulses and ego that cause you to bail out of winning trades too quickly (because you want to “prove” to yourself that you’re right) and stay in losing trades too long (because you want to “prove” that you’re not wrong). I’ll put this warning out there for anyone who’s reading, and I’m sorry in advance if I turn off some people from even wanting to try this style of investing, but if you cannot control your emotions, and if you don’t know how to separate your feelings from your trading decisions STAY THE HECK AWAY FROM DAY TRADING. There…somebody had to say it.

But anyway, being that this website will teach day trading for beginners, I hope that you will at least stick around because if nothing else, it will be entertaining (LOL), but hopefully you’ll learn some good trading principles that can really beneifit you in the long run.