Become a Stock Market Day Trader How to Become a Stock Market Day Trader

What is day trading?
Is it something I can do full time from home?

Our economy is in a crisis, Should I really be attempting to trade stocks in todays financial uncertainty.
Difficulty: Easy
Instructions
Things You'll Need:

* HIgh speed internet
* confidence
* money
* online broker account

1.
What is day trading? It's buying and selling any stock in the same day. PERIOD ! Day traders never hold any stock over night or during the weekends because of the unpredictability of world events. Yes stocks are effected one way or the other by the entire world.
The first step after you secure a reliable computer with high speed internet connections.
2.
Next your will need to open an online broker account, like e trade or one of the other dozens or so online brokerage firms. Starting accounts with brokerage firms can range anywhere from $500.00 minimum deposit up to $ 75,000.00 minimum deposit. Don't worry these firms usually offer interest.

Be selective of the firm you choose cheaper deposits does not mean faster or inexpensive trades. What do I mean by trades? Every time you execute an order to buy or sell any amount of stock the firm is going to charge you anywhere from $5.00 up to $29.00 per trade. That's 29.00 when you buy and another 29.00 when you sell.
Continue reading the next step to see why this can make or break your trading day.
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Let's say you buy stock in YXZ corporation. You buy 100 shares this stock on the cheap for $ 1.00 a share. Your total cost would be $100.00 for the stock plus an additional $ 29.00 for the brokerage firm to execute the order. Total $ 129.00. The stock than doubles and you sell your 100 shares for the going price of $2.00 per share. Sweet You just got back $ 200.00. WRONG it's going to cost you another $29.00 for the firm to execute your sell order. Now your total become 129.00 initial investment plus trade fee plus and additional 29.00 trade fee. Total 158.00. The $ 200.00 return and you only profited $ 42.00.
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Remember day trading is a daily business you buy than sell in one day. Professional traders actually buy than sell within a few minutes. So the seasoned experienced day trader would of made 42.00 for just a few minutes.
The professional day trader would of used a lower charging broker with reliable execution and fast turnable and only paid $ 15.00-$20.00 per trade. Profiting him/her even more.
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Day traders trade stock hundreds of times a day. Not are are profitable trades. Day traders usually only profit 2.00-5.00 per trade but trade 100 times or more a day making him or her a couple hundred dollars.
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Sound good? It can be done and many do do it today. Day trading is not without risk. It is not for everybody. Do not quit your job. Just because your friends cousins sister in law twice removed makes 500.00 a day as a stock market day trader does not mean the majority who venture out do.
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You profits depend on:
Gaines per trade
The number of trades
Commissions or transaction cost ( as I explained above)
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My advise to you : Try paper trading first for a long time. It's a day trading version were no real money is exchanged. Google the subject you'll find many sites and brokerage firms now offer free paper trading so you can learn how it works and realize how much you could of lost or gained for that matter.
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While paper trading make sure you are conducting your own research on what stocks to buy, sell or stay away from. Information, is your best friend. Day traders generally work alone and never buy into those day trading insider trade secrets. Insider trading is illegal. Just ask Martha!

A good place to start is Yahoo!Finance (quote.yahoo.com)
10.


Is day trading right for you ? What does it take?
Knowledge is one thing - Understanding how the market works.
You have to be willing to fail and take responsibility for your actions. Meaning knowing you could and most likely will loose some money.

Confidence: You can not second guess, say things like I should of waited could of made. Just execute your trades take your profit or your loss than move on.

You must also be very patient waiting for the right moment thats best for your investment portfolio .

You should also establish daily goals whether earning and hopefully not losses. Don't get caught chasing losses . If your down 50.00 for that day don't waste another dollar trying to chase down that 50.00

Of course you will need Money to invest. Better if you actually have money to loose.
11.


Can you loose your house or your shirt investing and day trading? Sure can if you bet those items. Otherwise you only loose the amount for money you spent buying into a stock. Unless the companies goes bankrupt the stock is yours if you choose to hold onto it.

Day Trading - Will You Succeed?

If you read too many websites about day trading, you might be lulled into believing that it's all incredibly simple. Don't make the mistake of plunging into any form of day trading without spending the time to learn what you're doing. And certainly don't start by investing every cent you posses, including next week's mortgage payment. Pretend, or paper trade for a little while, make sure you're earning profits consistently, and then you can start to think about using some of your real money - but only some!

As you practice trading, you'll find you learn an enormous amount, and once you have a few dollars of your own on the line, you learn a lot more. It's usually best to start by trading on a longer timeframe, too, so you can master the skills. Learning the technicalities of trading takes time but it's possible to master it. The tough part is the psychology - how to deal with your own emotions and reactions in trading situations. If you can read up on the psychological side of trading, particularly day trading, you'll be better equipped to handle situations as they arise.

If you're serious about day trading, then you will need to find out how much money you need to get started. Different brokers will have different requirements for funding an account. Be aware, too, that it can be tough to make money trading a flat market. As a day trader, that's even more relevant to you. You need enough movement in the market to provide profitable opportunities.

So what is day trading? Basically, it means online trading of stocks or indices, within a very short timeframe - in this case, for one day or less. Day trading requires you to make accurate assessments of trading situations very quickly, and act upon your decisions instantly. This is not a game for the indecisive or faint of heart. It's important to know exactly what signals you're looking for in order to enter a trade, and know your exit strategy even before you buy. Once your exit signals appear, you have to act immediately, not dither and try to second-guess the market.

If you haven't already worked it out, day trading can be extremely stressful. If you can't afford to lose all the money you're investing, or more to the point, if you have a fear of losing any of the money, don't do it. Your fear will paralyze your decision making at the times you most need to be quick and decisive. You also need to be very self confident, so that when you've done your analysis and seen the signals to enter or exit a trade, you're confident that you've done sufficient research and have made the right decision.

Nerves of steel and a dash of raw cunning are part of a day trader's personality, and so are discipline, determination and a high tolerance for stress. It can be great fun, but can always stress you to the max. Most successful day traders work for large institutions, not for themselves.

Cash And Stock Market

There are basically two types of stocks, preferred and common. Preferred stocks, and just as the name implies, these stocks are paid dividends before common stocks are paid, and should a company fail they are entitled to the company's assets before common stock holders. Common stocks on the other hand are at the bottom of the pile for dividends and assets, so common stocks are not as good as preferred and preferred are not as good as bonds in regards to payment of assets should a company fail. When you hear people referring to buying stocks, they are usually referring to common stocks, which is the type of stocks that most investors purchase. As with all investments, risk and profit are counter balanced, that is to say preferred stocks are safer than common stock as they have a better probability of being able to recover value from asset forfeiture, than do common stocks. While common stocks are on the bottom of the pile and have to divide up the remains of assets if any. In stocks the higher the risk, the greater the return.

There are five kinds of stocks that you will consider based on your investment goals;

GROWTH STOCKS: Just as the name implies, these are stocks main objective is growth over time. A majority of small investors will invest in these stocks as they are one of the safest as the risk involved is small. These stocks usually perform well over a long period of time and may actually out perform the economy and the stock market itself.

INCOME STOCKS: These stocks will have a high rate of return, normally due to the fact that the company distributes a large portion of its income to shareholders in the form of dividends. However, since these stocks are based on a company's profits can be affected by economic down turns that affect that company's niche in the economic sector. I view these stocks as a little riskier than growth stocks but still safer than the more aggressive types of stocks that will be discussed later.

BLUE CHIP STOCKS: They received their names from gambling, as the blue chips use to be the highest value chip. In the case of stocks it refers to companies that are the leaders in their industry or market sector. They are large companies that have been around for a longtime, have a proven track record, and are stable. These stocks generally are priced at the highest end of the cost spectrum for stocks and their stock prices do not normally have wide swings in its price. These stocks are reliable and usually pay dividends on a regular bases. However, in the current stock market we have seen these prices drop significantly, which is very rare, and possibly a good time to buy. Do not buy solely on the drop in price. You need to do some foot work and make sure that the company is still sound and will be able to resume its place in the market. Blue chip stocks are generally found in retirement portfolios and do well over time.

VALUE STOCKS: These stocks are ones that are under priced based on the company's earnings. These types of stocks carry with them a high degree of risk. Many investors buy these stocks solely on the belief that the company will perform better in the future. The more speculative a stock is the higher the risk. Information on the company, their product, their economic niche and their management can reduce the risk.

RECURRING STOCKS: These stocks generally follow the up and down swings in the economy, and generally do well in a growing economy. However, you must stay on top of information relating to the economy so you can make a well informed decision regarding these stocks.

Now you must sit down and decide what your investment objectives are, long term slow growth, income generating, long term safe growth with very limited risk, or high risk/high immediate returns. Normally all stock portfolios carry all five of these types of stocks. The percentage of anyone type of stock will show the overwhelming performance objective of the investor.

As with all investments you must always ask the most important question. Am I willing to lose my money, can I afford to lose it? Remember, stock investors are risk takers. They attempt to mitigate the risk as much as possible and do this thru research, judgment and common sense.

As a new investor you have already determined the amount of money you can lose. You have set down and made a calculated decision of your goals and expectations. Now what? Assuming that you are going to do this yourself, as opposed to hiring a broker, in one word research. Since your reading this on the computer you may begin on the Internet, or you can do it the old fashion way, going to the library, researching by using old newspaper listings of stocks and doing a graph of that stock over the last several years or the last six months and then continue this process several months into the future. My guess is you will use the Internet, is easier and faster. There are a lot of different tools that you will be confronted with, deciding which ones you want and need will be enough to drive the common person to inaction. Initially you want to view past performance of the stocks you are interested in. Order a prospectus from the company and review it carefully, checking out its balance sheet and its management. Next you will follow the stock, anywhere from several weeks to several months, depending on your level of comfort, and put it on a graph so you can visually see the stock's performance. Until you become confident on your new ability and skills in researching and investing it is highly recommended that you begin with cheap stocks and invest moderately. Remember, your goal at this point is learning, not making money, but not losing it either. Monitor your result's, find out what you did right and more importantly what you did wrong or what you failed to do. As you continue you will find that you are looking for more and more information and informational tools that you can utilize to conduct your research faster and more accurately, and don't forget to keep up to date on current events as these could affect your stocks and stock decisions.

Most people will give up and go to a broker or a mutual fund, they either don't want to spend the time and effort needed to do the research, or they have no confidence in themselves or their abilities. Those that I have talked with, that have succeeded in investing. Made a lot of mistakes and lost money at first. They continued to educate themselves, continued doing research, and continued learning and growing in their abilities. They all had a goal and had set up a system for their research and investing, and followed it every time. Most continued doing investing as a hobby, and did well for themselves. Several enjoyed it so much and learned to do it well enough to actually use it as a second job and made good money year in and year out.

THE CURRENT MARKET: With the current stock market drops and government intervention there have been a lot of losers and there have been winners. I don't have a crystal ball and can't see into the future, but I can research the past of the market in general,and specific companies' and stocks in particular, and make a reasonable assumption. A general rule that I have always heard was, do the opposite of what everyone else is doing. This saying came about due to people and companies reacting out of emotion, usually fear and not on research. It's like poker, every hand is a loser and every hand is a winner, it depends on how you play it.

As the current stock market has shown us, you can not always count on the markets going up, and going down. If you watch the market you are aware of the large mutual funds. They seem to always do good, why? A lot of them use expensive computer systems with automatic sale and buy features to monitor their accounts. The small investor, doesn't have that, until now. Even with limited computer know how, little or no experience in the stock market you can be successful.

How To Begin In The Stockmarket

I had some spare time, so I thought I might as well post an article on the way the stock market can affect you when you first begin trading. This is on your way to making your first million.

In a "Bull Market" the prevalent conditions of rising share prices, resources boom and general market hype actually encourages novice traders to begin trading. The mind set they have is, "that making money is easy." And any losses they do have are quickly recuperated and therefore no lessons are learnt from the mistakes they have made.

When their first "Bear Market" or a downturn comes along and share prices drop, this is when the novice pays dearly for any mistakes they make.

Trading in the market is not a game for the novice. For being poorly armed and ill prepared the novice quickly finds that the honeymoon period is over. To their dismay the original capital they started with has been quickly whittled away.

The novice who thinks that profit is the only thing to worry about is in for a very rude awakening.

The first emotions that the beginner will experience are "Fear and Greed."(See past article.)

Fear will paralyse while greed will galvanise you into action. In other words
Fear makes you hold on onto a downward turning stock while geed encourages you to chase upward rising share prices.

The way the share price has moved in the past and also in the future can often be seen as fear and greed in action.

When any share transaction has taken place two things have happened. Firstly the "Seller" has sold to minimise any future losses. This is because He believes that the share price is not going any higher.

The buyer on the other hand believes that this stock is at a bargain price and that the stock will go higher still.

Only time will tell who will be happy or regretful. But at that instant both parties believes that they have done the best that is possible.

The best advice any beginner can have is to not rush in blindly.

Use the information that is available on this site and others. Take your time and learn, research, paper trade until you are fully prepared and then stick a toe in the water first before diving in.

Good luck and profitable trading.

Stop Losses - An Important Part of Stockmarket Trading

If there is one area guaranteed to confuse many traders and lead to multiple opinions on the most appropriate approach, it is the subject of stop losses. The science and the art of placing stops is featured extensively in many trading books and guides, but the bottom line is that there is no right or wrong answer, simply the fact that stop losses must be used to limit potential downside exposure when trading. Traders should also be careful not to confuse stop losses with buy stops, which trigger an opening position rather than closing the trade.

It is very important not to package together the placing of stops with money management, as the two represent different strands of trading. Simply put, stops are there to protect profits and limit the potential downside at any time once a trade has been opened, and are part of an exit strategy for trades that are already open. Money management covers position sizing or amounts to be risked within each trade of a portfolio.

Within this potentially complex subject, there are many different types of stops, and it should be added that stops are never guaranteed unless that facility is offered by the broker for an additional charge. Nevertheless, their use is an essential part of any trading strategy. For the examples below share prices are used, but stop losses should also be used when trading CFDs in commodities, forex or indices.

The uses and abuses of stops

Much has been written about the placing of stops and how to avoid them being triggered without too much risk. This of course is the $64m question for most CFD traders and very often causes more consternation than any other aspect of the trading process.

The basic idea behind where to place a stop is by reference to the overall trend or trading range within which the share is moving. As to the actual level of the stop, it depends on several factors including the trader's overall money management rules, the amount of leverage, the time frame, and crucially the underlying volatility of the share chosen. The stop should aim to be placed at a level which if triggered would confirm the trade was incorrect.

There is no point in trading a highly leveraged CFD account with routine 5% stops as eight losses in a row, which statistically can be expected every few hundred trades, would lead to a minimum 40% drawdown on the account.

Having said that, there is equally no point in attempting to reduce the risk too far by setting 1.5% or 2% stops in highly volatile stocks or takeover situations as each trade needs room to breathe, and stops this tight are likely to be triggered within the normal daily ebb and flow of price movements.

A good rule of thumb is that if you cannot see at least double the potential profit in a trade compared to where you expect to place your stop loss, that trade should be passed over. Indeed some CFD traders look for three times profits achieved against losses as a starting ratio. Consequently an approach like this can be very successful by winning just three or four times out of ten, and is the hallmark of many of the world's leading traders.

Many losing traders look for an entry point or strategy that wins six or seven times out of ten, but this is very hard to achieve consistently. Although the feeling of winning regularly is certainly warm, the win/loss ratio here very often tends to be very poor as too many winners are taken quickly, so the correct use of initial and running stops placement is crucial.

Types of stops:

The basic maximum loss stop

The maximum loss stop is the starting point for most traders and is triggered when the share price hits a level below or above the opening price of the trade, depending on whether it is a long or short position. It can be measured in percentage points or actual money terms, but for these examples percentages are used. So if a CFD trader buys shares in British Telecom at 330p with a 2% stop loss, then the allowed loss is 6.6p and the position is closed if the bid or selling price falls to 323.4p or lower.

Note that no mention is made of how many shares are purchased or how much is being risked, as this is part of the client's overall money management.

If the shares gap down below the stop either intra-day or at the open of trading the next day, the closing trade is triggered at the first price available in the market for that size, which is why stops are not guaranteed.

As to the percentage size of the stop to be chosen, that depends on several factors including the trader's overall money management rules, amount of leverage, time frame and crucially the underlying volatility of the share chosen, which is very important.

Volatility stops and the ATR

Clearly, a percentage based stop is likely to be triggered more quickly in a highly volatile share and one of the ways traders can adjust stop levels is by ratio to the underlying volatility. There are various measures of volatility available, but a simple way is to use a stop related to a multiple of the average true range indicator, which is featured in most software packages.

The ATR determines a share's volatility over a set period that can be defaulted as desired. The daily ATR indicator is very simple to calculate and is the highest of:

The difference between the current high and the current low

The difference between the current high and the previous close

The difference between the current low and the previous close

Basically this is the maximum range in which the share has traded from the previous close to the current high and low. The average is then taken over a set number of days (ten is often used), and the stop is then calculated as a multiple of the ATR.

The reason this indicator is useful is that it becomes easier to place a stop outside the normal range of trading so that it is not hit by the short term random action of individual shares based on their average volatility.

As to the multiple of the ATR to be used, that is for the trader to decide, but longer term players and seasoned stockmarket investors tend to find a 2.7 to 3.3 multiple (which can equate to 5% to 15% stop losses) is applicable. Shorter term or highly leveraged players need to tighten the stop accordingly by adjusting this multiple.

The breakeven stop

This is a commonly used stop in which the trader closes the position if it reaches a minimum profit and then returns to even or back to a loss. So in the above example, if the price of BT rises say 2% to 336p, the stop is moved up to 330p, which was the opening price of the trade.

Please note that the breakeven stop here is not simply a new 2% stop loss - it's very slightly different - but very often this approach is used as a rough and ready way to protect the downside. This leads on to the important subject of trailing stops.

Trailing stops

Trailing stops are widely used by professional traders as they provide an element of protection for winning positions without sacrificing too much of the profit.

The idea here is that once the position is opened, the trailing stop runs behind of the best profit achieved throughout the trade and the stop (whether percentage or price) is moved up accordingly.

There are three rules and suggestions (examples here are for long positions):

1. The stop can and must never be lowered

2. The percentage or price of the stop at each stage of the trade does not have to be the same. For example, the trader in the above example may begin with a 2% stop in BT, and then the share price might rise to 346.5p, which represents a 5% profit. At that point, the trader may wish to tighten the stop to 1%, so that a minimum 4% profit can be taken but with more potential upside. This approach is to the discretion of each player, but it is a very useful way of nailing down profits.

3. Another approach is to raise the stop loss with reference to recent action after a certain profit has been reached. Instead of a percentage stop, the trader might move the stop up behind daily lows, thus protecting against a potential trend change.

4. The stop might be triggered if there is a sudden rise in volatility with a reversal in the shares, and some traders use as a trigger if the day's ATR is double the average ATR of the last ten days. This is very useful where a wider initial stop has been taken and there is the potential for a trend change before the trailing stop is hit, thus protecting the downside.