A Beginner's Guide To Day Trading Online 2nd Edition

Toni Turner

• Publisher: Adams Media
• Year: 2008
• eBook ISBN: 9781440500954
• Topic: Business
• Subtopic: E-Commerce
• Index: Business

The national bestseller—updated for the new stock market!

"Read the book if you want to know how the market works and how to make it work for you." —Greg Capra, president of Pristine.com, coauthor of Tools and Tactics for the Master Day Trader

"By using the tools, trading tactics and strategies revealed in...A Beginner's Guide to Day Trading Online, you will be armed with the skills needed to help you win your battle with the markets." —Steve Nison, CMT, president, www.candlecharts.com, author of Japenese Candlestick Charting Techniques

"Read this book, and, two, reread this book. It will help you achieve your trading goal, which is to make money in the markets. Every trader, from a beginner to the advanced professional, should have this book!" —John Person, CTA, president, Nationalfutures.com

"There are only a handful of trading educators that I would recommend listening to and...Toni Turner is one of them." —Hubert Senters, www.tradethemarkets.com

Day trading is highly profitable—and highly tumultuous. Moreover, the financial markets have changed considerably in recent years. Expert author Toni Turner gives you the latest information for mastering the markets, including:

• Decimalization of stock prices
• New trading products such as E-minis and Exchange Traded Funds (ETFs)
• Precision entries and exits
• The new breed of trader

Written in an accessible, step-by-step manner, A Beginner's Guide to Day Trading Online, 2nd Edition shows how to day-trade stocks in today's market.

CHAPTER 1

This Ain’t No Dress Rehearsal!

BENEFITS OF DAY TRADING: THE GOOD NEWS

Day trading is a made-to-order profession. By and large, you can work when and where you want to. You can structure your days as you chose, working from your office or home, or even when traveling, when need be.

If you think of it as a small business, the initial investment in equipment—a good computer, one to three monitors, fast Internet hookup, and software—is relatively inexpensive.

You can live anywhere. If you decide to move to Bangor, Maine, from Yeehaw Junction, Florida, just dismantle your electronic monsters, pack them up, and go. If you long to go skiing for a week and can afford it, take your account flat (trader’s jargon for taking your account to cash), and go.

As an active trader, you’re independent and answer to no one but yourself. Forget reporting to a nasty boss. You can stay in bed when you have the flu. You don’t have to wear a tie that chokes you or high heels that dislocate your back. You can trade in a torn T-shirt, flannel shorts, and duck slippers.

You’ll develop your own style, fast-paced or easy-going. Days when the market is highly volatile, you can, and should, take the day off. Run errands, play with your kids, or go shopping with the money you saved by staying out of the market on a whippy, choppy day.

THE FLIP SIDE: WALL STREET TAKES NO PRISONERS

All of the above is the good news. Now, let’s look at the less-than-charming realities you need to know before you place that first trade.

When I first started trading, I crawled into bed one night with a bowl of praline ice cream and Trading for a Living.

In the opening pages, author Dr. Alexander Elder writes, “Markets operate without normal human helpfulness. Every trader tries to hit others. Every trade gets hit by others. The trading highway is lettered with wrecks. Trading is the most dangerous human endeavor, short of war.”

“Humph,” I thought. “Dr. Elder certainly has a negative attitude.”

A few weeks and one bloodied trading account later, I knew Dr. Elder was right on the money. In the hands of the wrong person, trading can be hazardous to one’s wealth.

Here’s another reality statement: This business crushes most who enter its doors. Nearly 80% of those who try, quit. They lose their trading accounts by ignorance, trading too much, or taking foolish risks. Some can’t handle the stress.

You can earn substantial profits day trading. If the rewards are high, however, so are the tradeoffs. The stock market is a ruthless arena. Newsweek once called Wall Street “the avenue of avarice.” It’s inhabited by the sharpest minds in the world, all intent on grabbing your money as fast as possible. It’s a greed-against-greed, fear-versus-fear, trader-battling-trader, if-you-die-I-win world. Every day. No mercy. The more you lose, the harder I laugh.

“But buying a stock can be a complacent click on my computer screen,” you say, puzzled. “I don’t see the greed and fear connection.”

Take my word for it. When I began trading, I didn’t see the connection either, but I learned in short order, and the lesson was expensive––very expensive.

The best way to start trading is slowly, calmly, and armed with knowledge you’ve already accumulated. Watch CNBC or another financial network every day for several weeks, so you can internalize market rhythms. Soak up the gist of the “if, then,” logic. If this happens on Wall Street, then that usually follows. Stare at market indicators and absorb how they act in relation to one another. Listen to market gurus and keep track as to whether their predictions come true.

Place paper trades for a few weeks. I’ll explain how in Chapter 3. Keep in mind, though, that while paper trading is good practice, it doesn’t accurately portray how real trades play out. Reason? The absence of emotion.

If you listen and heed my advice, it will save you money and headaches. Every caveat I give you in the pages that follow comes from a lesson I learned the hard way. If you learn from the lessons, you’ll keep your losses small and your gains high.

I jumped into trading head first, assuming I knew what I was doing. I didn’t.

As a successful investor, I imagined trading was the same thing, but at a faster pace. Not true. Comparing trading and investing is like comparing hamsters with kangaroos. Yes, the time frames are different, but mindsets are different, too. So are entry points, exit points, and risk-reward ratios. Traders concern themselves with market and stock trends, whereas investors want stocks that outperform the overall market.

Please go slowly when you enter this profession. A cautious turtle will keep his or her money, then make more. An impetuous hare will end up in the briar patch.

WHAT DOES A DAY TRADER LOOK LIKE?

Traders in the trenches insist we need three things to trade successfully, namely, the “Three Bs,” or Bucks, Brains, and, uh, . . . Boldness (polite substitute for actual word). They’re right.

First, of course, is bucks. Anyone who says you can start trading with $2,000 or less is blowing smoke. Why? Because, at some point in time, you are going to lose money. You may make it back, but you will lose it first. Show me a successful trader who says he or she didn’t lose money learning how to trade, and I’ll show you someone growing a Pinocchio nose! If losing money stops your heart, trading is not your game.

Next comes brains. I’m going to assume you own mental horsepower if you’re reading this book.

If you don’t know what I mean by boldness, you will, if you stick around the financial markets long enough. This profession gives you confidence and mental toughness not only when you’re trading, but in every area of your life. After all, if you’re a day trader, you survive in one of the toughest arenas in the world.

My nontrading friends ask me repeatedly, “How do you do that all day? Isn’t it risky?”

You bet. If you don’t love jumping blindfolded into the dark unknown, with no guarantee whether you’ll land on a pile of feather pillows or into a crater of hot lava, please don’t trade.

Successful traders know how to act swiftly. Many times you’ll have one second to make a decision that may affect your account by thousands of dollars. If your middle name is Waffle, you’ll be happier investing.

The best traders also multitask easily. They scan charts, while listening to CNBC, while watching a list of major market indicators and mentally computing their relationship to one another, while keeping an eye on one or more stock positions, while remembering the strategy and stops for each trade, while executing a momentum play or two, while . . .

Successful traders also pay attention to their intuition. By intuition, I don’t mean you should buy a stock because you have a “gut feeling” it’s going to fly. That’s never a good idea. I mean you can use the gut feeling developed by all good traders through experience—the hunch that tells you something in the market is good, or amiss, before the actual event takes place.

The traders holding the fattest wallets have the ability to change their minds in a nanosecond. Being right or wrong has nothing to do with it. They know that sticking to a decision they made hours, or even minutes, ago just to prove they are “right” is the worst thing a trader can do.

Emotional discipline is a must. The best traders monitor their emotions constantly. In Trading for a Living, Dr. Elder writes, “Your feelings have an immediate impact on your account equity. You may have a brilliant trading system, but if you feel frightened, arrogant, or upset, your account is sure to suffer.”

I’ve traded while feeling scared, smug, and sad. During those times, I’ve always lost money. One emotion I still allow myself, however, is pure, self congratulation. After I close a great trade, I say, “You go, girl,” and I grab a piece of chocolate.

This is the perfect moment for you to pause for introspection and conduct a reality check as to whether or not you’d be happy and prosperous as an active trader. Forget your ego. Be completely honest and ask yourself these questions: “Can I chance losing part of my account?” “Do I think fast and stay cool under stress?” “Can I control my emotions?”

TO TRADE OR NOT TO TRADE?

As one of my best friends says about life, “This ain’t no dress rehearsal.”

Neither is trading. You can’t “sort of” ride a roller coaster. Either you’re hurtling through space at mach two with your hair on fire or you’re standing on the ground below. You can’t do both. To dangle one foot outside the speeding car is mighty dangerous.

Before you start to trade:

Study this book and others on the Recommended Reading List located in the back of the book.

Explore high-quality trading chat rooms on the Internet; analyze what their members say. Most offer free trial memberships.

Consider taking a trading course from a reputable school.

Attend a “money” show or traders’ conference.

Join a local trading group and talk to other traders. You learn from every kind of trader, whether they trade stocks, commodities, or jelly beans.

AUTHOR’S NOTE

Learning to trade successfully was the most vitalizing, yet the most difficult, undertaking of my life.

As with all professions, the good times, when everything fell into place, delivered a sense of self-satisfaction and composure. The not-so-good times, when everything I touched knocked me down, gave way to discouragement and frustration.

To cope with the challenging times, I studied principles gleaned from motivational teachings. I hoped that if I stepped back from the trading world and observed larger truths of life from a different vantage point, it would empower me to persevere. It did.

Each “Center Point” in this text summarizes various concepts and observations that kept me centered on my goal of becoming an accomplished trader. They also benefited other areas of my life.

I trust you will find these messages to be valuable handrails as you make your way over the stepping stones to success.

CENTER POINT: THE POWER OF COMMITMENT

“Until one is committed, there is hesitance, the chance to draw back, always ineffectiveness. Concerning all acts of initiative (and creation), there is one elementary truth, the ignorance of which kills countless ideas and splendid plans: that the moment one definitely commits oneself, then providence moves, too. A whole stream of events issues fro...

Table of contents

• Cover
• Dedication
• Foreword
• Introduction
• Chapter 1—This Ain’t No Dress Rehearsal!
• Chapter 2—Wall Street: A View from the Top of the Skyscraper
• Chapter 3—Day Trading Is Your Business: Let’s Set It Up That Way
• Chapter 4—The Winning Market Mentality That Leads to Profits
• Chapter 5—Trading Fundamentals You’ll Build On
• Chapter 6—Technical Analysis 101: The Trend Is Your Friend
• Chapter 7—Choose a Stock to Trade
• Chapter 8—When the Tough Get Going: Beginning Trader’s Boot Camp
• Chapter 9—Plan Your Trade and Trade Your Plan
• Chapter 10—The Swinging Day Trader
• Chapter 11—Scalps and Shorts, or the Quick and the Dead
• Chapter 12—Love Your Losses: They’re a Trader’s Best Friend!
• Chapter 13—Trading Survival Techniques
• Chapter 14—The Future Is Now!
• Recommended Reading List
• Acknowledgments
• About the Author
• Index
• Copyright