Day Trading for Dummies is a follow-up to my post titled “How to Read Stock Charts for Dummies.” You see, people have a habit of overcomplicating things that are very simple and easy to understand. I think this gives people an excuse to fail, honestly. I mean, if you make something so complicated that you can’t understand it, then it’s not your fault that you failed, it’s because the subject matter is really difficult, or the task is impossible, right? That’s total B.S.
There’s a great Einstein quote regarding one’s ability to understand and explain something and it goes “If you [...]
From the category archives:
Day Trading Strategies
For anyone wishing to learn how to trade stocks in the stock market, it is essential to become familiar with basic methods of risk management that can protect against excessive loss and enable the capture of profits if they arise.
Let’s take an example of what might happen
Without going into details of how a stock is analyzed and chosen as a trading prospect, and for that there are a whole set of criteria, let us assume that, after suitable due diligence, or for whatever reason, a particular stock issue has been chosen as a good candidate to trade. The objective [...]
Day trading stock online allows you the freedom to trade from wherever you’d like. A majority of day traders are doing their trading from the comfort of their own home. Leave the process of elbowing others out of the way and shouting all over the place to the dinosaurs on the floor of the NYSE.
Day traders are better off trading stocks the NASDAQ anyway because the entire market is electronically based. That isn’t to say you can’t day trade NYSE stocks, you certainly can, and you can catch some great moves in those stocks. The NASDAQ, though, offers a day [...]
Intraday trading, or day trading, is trading that occurs during one trading day. That means your intraday positions are entered and exited during the 6 1/2 hour time period that the stock market is open.
Intraday trading is considered one of the riskiest form of trading due to how quickly you can accumulate losses. I think the only risk in day trading comes from the user, much in the same way that swing trading, or long-term investing does. The only difference is that where a stubborn investor might have day or weeks to admit that he’s wrong, a stubborn day trader [...]
In order to day trade, you need to have reliable intraday charts. Without this crucial source of information, you’re dead in the water.
What is an intraday chart? An intraday stock chart is simply a chart that displays information for time-frames shorter than a day. For most traders this includes 1, 5, 15 and 60 minute charts. Also, if you’re trading a market that trades 24 hours a day, like the Forex, a frequently used intraday chart is the 240 minute (or 4 hours, for the mathematically challenged). Using these charts, day traders are able to make decisions based on where [...]
The easiest of the all the technical indicators to follow is the moving average. There are two types of commonly used moving averages when you first begin to learn stocks. The first is the simple moving average (SMA) which “simply” averages all of the closing prices for the last number of days. The other option is the exponential moving average (EMA) which averages over a given number of days but gives more weight to the recent prices versus the older prices. For most cases either moving average will work fine, but play with both of them to determine which style [...]
There are several variations of the opening range breakout, and one of the most common is the opening gap reversal. Like any open range breakout, this day trading pattern consists of a breakout from a range that has been set up in the first hours of trading.
There are two variations of the opening gap reversal; the first is a gap followed by a failed attempt to close the gap resulting in the reversal and breakout. The second consists of a gap, followed by a failed attempt to continue in the direction of the gap which results in the reversal and [...]
There are many places you can go for stock trading information. Many of them aren’t worth much, as they are simply a shell of a site designed to sell you some sort of miracle trading software that will supposedly make you rich.
The first place I point any newbie looking for online stock trading information is Investopedia. As the name implies, it’s an online encyclopedia full of investing and trading information. It’s definitely the best place to start if you have questions like
What is a stop loss?
What is an opening range breakout?
What is a stock?
What is an option?
How do I trade [...]
Last time, I talked about my goal to day trade for a living; now let’s talk about what might really be required of someone who is day trading for a living.
First of all you need capital. You can paper trade all day, but unless you’ve actually got money invested in the market, you can’t very well make a living at it can you? If you’re day trading for a living, you’re going to be buying and selling stocks all day, and this is going to require quite a bit of capital. If you’re day trading full-time you’re going to be [...]
My ultimate goal is to be day trading for a living. Some of you are aware that I am not a full-time trader, but I trade pretty regularly, and I do research almost daily whether or not I trade. I used to even engage in the social aspects of trading, like chat rooms, forums, and Stocktwits, but I stopped all of that social stuff to focus on things that would allow me to focus on that ultimate goal of day trading for a living.
Late last year, a series of occurrences in my life caused me to revaluate what I was [...]
We’ve discussed the opening range breakout before, or it least what it takes to make for a successful breakout trade, but we never really covered the basics. That’s because there are a million websites where you could receive this information, but I might as well add my own two cents. The opening range breakout is often misunderstood because, like many things in day trading, they appear simple on the surface but are actually fairly difficult to trade. There are a lot of factors that must be accounted for and a new trader simply does not have the experience to take these [...]
What do you do once you’ve entered a trade? Do you already know where you’ll exit, be it a win or a loss, or do you just meander along until you feel like exiting? Or, even worse, do you sit there and agonize over every single move in your stock; exiting too early or too late and losing loads of money along the way?
Micromanaging Your Trades
You’re bleeding cash. You watch every twitch and wiggle of the price and each move causes you a little more anxiety. You rationalize exiting early or a little too late and each time you either [...]
You seem to think chart analysis is a lot more difficult than it really is. Instead of giving it a go on your own, you rely on the wisdom of us brilliant chartists to hand you money-making set-ups on your favorite stocks.
I am here to tell you, friend, that it’s not that difficult to do some basic technical analysis on your own. Let’s take a walk through the basics, shall we?
Connect the Pointy Bits
On a stock chart, you have peaks and troughs. In order to identify the trend of a stock, you simply find these peaks and troughs and connect [...]
Before ever entering a trade, you should already know how you are going to get out. The trade should be planned end-to-end, whether the plan turns out to be a winner or loser. In this post I’m going to discuss how to set stops to protect yourself from your biggest enemy, you.
Mental Stops
Mental stops are a questionable strategy. As a trader, the biggest battle you face is not against the market (you will lose that battle, I promise), it is the battle against your own mind. Any chance to eliminate your mind from the process of trading gives you an edge [...]
Contrary to popular belief, day trading is all about losing. Winning is great, but it’s how you deal with the losses that will define you as a trader. If you can learn from every trade, win or lose, I can almost guarantee you will succeed in your trading endevours.
Better Trades
The first thing you should focus on is making better trades. Hold the winners longer, and cut the losers quicker. This approach will ensure that you become profitable long before you get your win/loss ratio positive. Even with a low risk/reward ratio of 1/2, you can lose twice as many times [...]
Last week, First Solar (FSLR) ran up significantly on news of a large deal for a solar power plant in China. The second day of the run was highlighted in my post about Opening Gap Reversals. That day saw a huge run up early in the morning and a slow burn back down to its opening price which formed the Long-Legged Doji in the stock chart above.
Long-Legged Doji
The long-legged doji is a specific form of the standard doji. While the doji signifies indecision, the long-legged doji shows that a deeper and more extended battle occurred between the bears and the [...]
I discussed the standard opening range breakout in my last post. Now I want to talk about a variation of the Opening Range Breakout . It’s called the Opening Gap Reversal
The Play
The chart above shows the opening range reversal that occurred when First Solar (FSLR) failed to fill its gap today. The standard mantra of traders is that gaps fill more often than not. I don’t know how true that is, but I do know lots of people believe that it’s true.
What happens when the market proves a lot of people wrong? You get a range breakout. The idea of [...]
The Opening Range Breakout is one of the simplest day trading set-ups to understand. The first hour of the trading day is the most volatile. Bears and bulls are battling it out in the stock market, trying to show you who’s going to be the boss for the day. This volatility creates a price-range you can trade from. Like all breakout trading set-ups, this is a great set-up because it offers a very low risk entry. If there is no follow-through on the opening range breakout, you should exit the trade immediately.
The Time-Frame
You are looking for opening range breakouts to [...]
The great thing about science is that it full of fun facts and formulas. The fascinating thing about trading is that it is not.
I pointed out a support level on Apple (AAPL) at 168.67 in another post. In that post, I also mentioned that I was long Apple (AAPL) above 168.67, and short below that level. Then, this morning, I tweeted a short trade even though the price was above 168.67 on my day trading charts.
“You’re a liar!” you might have shouted; “You tricked me! I went long because you said to go long!” I also qualified that statement [...]
I use this method regularly on stocks on my core watch list, and every time I pick a new “in play” stock to add to my watch list. You can use this method to identify overall trends as well as key levels to trade from.
I have chosen one of my core stocks, Apple (no pun intended), to use as an example. I always keep an eye on Apple because it has loads of volume, plenty of daily price range, and it makes predictable moves.
Starting with the weekly stock chart above, you can see that Apple (as well as [...]
Day trading requires patience. One of the only things better than really nailing a trade is the satisfying sound of the ball cracking into the back of the plexiglass of an indoor soccer goal. I am not a prolific goal scorer, but I recently scored a goal that was hailed as the “Goal of the Match” in a 5-1 win. What made this goal so perfect is the same thing that is often responsible for my best trades – patience. So picture this; the field is about the size of a hockey rink, complete with wooden sideboards. [...]
I was born in the year of Pac-Man. As a matter of fact, I think it’s no coincidence that it debuted a week after my birth. They knew I was coming. And as far back as I can remember remembering, a large portion of my life has been dedicated to gaming. In those 30 years of gaming I believe I’ve picked up some skills that are useful when day trading.
Gamer’s Trigger Finger
When it comes time to pull the trigger, we gamers do so without hesitation. We are no stranger to watching a screen all day and having to point and shoot at exactly the right moment. We expect accurate [...]
