P. 1
The Complete Guide to Day Trading

The Complete Guide to Day Trading

|Views: 45|Likes:
Published by vantagev12

More info:

Published by: vantagev12 on Jul 23, 2011
Copyright:Attribution Non-commercial


Read on Scribd mobile: iPhone, iPad and Android.
download as PDF, TXT or read online from Scribd
See more
See less






  • Introduction: Why Day Trading?
  • Part 1: Day Trading Basics – What You Should Know
  • What Is Day Trading?
  • Who Should Be Day Trading?
  • Is It Really Possible to Make a Living As a Day Trader?
  • How to Get Started - Define Your Goals and Make a Plan
  • 1.) Define Your SMART Goal
  • 2.) Make a Plan
  • 3.) Execute the Plan
  • How Much Money Do You Need to Get Started?
  • Determining Your Risk Tolerance
  • What You Need to Begin Trading
  • A Computer
  • An Internet Connection
  • A Charting Software
  • A Broker
  • A Properly Funded Trading Account
  • A Trading Strategy
  • How to Develop Your Own Profitable Day Trading Strategy
  • Step 1: Selecting a Market
  • Trading Stocks
  • Trading Forex
  • Trading Futures
  • Trading Stock Options
  • Step 2: Selecting a Timeframe
  • Step 3: Selecting a Trading Approach
  • Fundamental Analysis
  • Technical Analysis
  • Day Trading Charts
  • Technical Indicators
  • Popular Trading Approaches
  • Step 4: Defining Entry Points
  • Step 5: Defining Exit Points
  • Stop Losses
  • Profit-Taking Exits
  • Trailing Stops
  • Taking Partial Profits
  • Time-Stops
  • Step 6: Evaluating Your Strategy
  • How to Read and Understand a Performance Report
  • Step 7: Improving Your Strategy
  • The 10 Power Principles – Making Sure That Your Trading Plan Works
  • Principle #1: Use Few Rules – Make It Easy to Understand
  • Principle #2: Trade Electronic and Liquid Markets
  • Principle #3: Have Realistic Expectations
  • Principle #4: Maintain a Healthy Balance Between Risk and Re ward
  • Principle #6: Start Small – Grow Big
  • Principle #7: Automate Your Exits
  • Principle #8: Have a High Percentage of Winning Trades
  • Principle #9: Test Your Strategy on at Least 200 Trades
  • Principle #10: Choose a Valid Back-Testing Period
  • There’s More To Trading Than Just Having a Strategy
  • The Seven Mistakes of Traders and How to Avoid Them
  • Mistake #1: Struggling To Identify the Direction of the Market
  • Mistake #2: Not Taking Profits
  • Mistake #3: Not Limiting Your Losses
  • Mistake #4: Trading the Wrong Market
  • Mistake #5: Lack of a Trading Strategy
  • Mistake #6: Not Controlling Your Emotions
  • Mistake #7: Overtrading
  • The Trader’s Psyche
  • The Three “Secrets” to Day Trading Success
  • Here are the three “Secrets” to Day Trading Success
  • The Tenets of Day Trading
  • How to Start Trading Without Risking a Single Penny
  • Bonus Materials
  • Appendices
  • Appendix A – Trading Plan Template
  • Appendix D – Reading Resources
  • Appendix E – Glossary

f you’re thinking about getting into day trading, then you’ve proba-
bly got a pretty strong motivation. More often than not, that motiva-
tion is money. You want to be rich. No, wait. Let me be a little more
specific: you want to be wealthy.


Just to make sure that we’re on the same page, let me touch on the key
difference between being “rich” and being “wealthy:”

“Being rich” means that you have a lot of money.

“Being wealthy” means that you actually have time to enjoy
your money, time to do what you want to do when you want to
do it.

So, is day trading really the ultimate solution to becoming wealthy? Let’s

Here's one way to become rich:

You work your way up to the position of an executive in a corporation
and make hundreds of thousands of dollars a year. Of course, you’ll be
working at least 10 hours per day and at least 6 days per week.


The Complete Guide to Day Trading

Here are three ways to become wealthy:

1.)Starting Your Own Company or Internet Business
2.)Investing in Real Estate
3.)Day Trading

Option 1: Starting Your Own Company or Internet Business

Having your own company means that you’ll have to find or create a
product, market the product, sell the product, deliver the product to your
customers, and collect the payments.

These days, there are many “Internet Marketing Gurus” trying to sell you
on the idea that you can automate everything, which will allow you to
sleep late, do nothing, and cash very fat checks on a regular basis. We
both know that this is a dream, nothing more.

You can automate the routine, sure, but not the exceptions. And believe
me: there are always exceptions when dealing with people – your cus-
tomers. Plus, as long as you have computers involved, you need to keep
Murphy’s Law in mind: "Whatever can go wrong, WILL go wrong.”
Nothing could be truer!

Even if you could automate most of the delivery, you still have to find or
create a product, set up a website, write salescopy, put the automation in
place, and generate traffic. And since the Internet is evolving so quickly,
you will constantly have to update your website and traffic generation

Okay, so what if you skipped the Internet part? If you have a “physical”
business, the headache might be even bigger: employees, vendors, law-
yers, competitors, invoices, customers, production problems, office
space, equipment, etc. I’ve known a number of small business owners
who have simply given up and gotten a regular 9-5 job. Sometimes the
reward just isn’t worth the stressful lifestyle.


Introduction: Why Day Trading?

Option 2: Investing In Real Estate

Our second option on the road to wealth is investing in real estate. But
with the market slowing down and the current credit crunch, it’s not that
easy anymore. Most lenders these days require a down payment of 10-
20% for investment properties, so you also need substantial capital to
even get into the business.

Another problem is the cost of a transaction. Whenever you buy or sell a
house, you will most likely have to pay a Realtor’s commission and face
closing costs. Because of these factors, it’s not easy to quickly buy and
sell houses. A transaction can last several days or several weeks. And on
top of that, you always have the possibility of problems with renters (if
you are renting out), or with contractors (if you are “fixin’ and flippin’”)
or with legal issues if you use those “creative techniques” that some of
the late night infomercials are promoting. It basically boils down to one
big pain in the neck!

You need an appraisal, too, and you might have to argue with the ap-
praiser about the value of the house; you need a home inspection and
might be surprised when you learn of all the things that need to be fixed
before you can sell; and, last but not least, your buyer might have to ob-
tain a mortgage. As you know, the mortgage industry has really become
“interesting” in 2007 (to say the least), and buyers that were pre-ap-
proved and pre-qualified might learn the day before closing that they
won’t receive the promised loan. And all of these problems are just the
tip of the iceberg. When it comes to hassle and problems, real estate in-
vesting is a flip of the coin, at best.

So, what’s left?


The Complete Guide to Day Trading

Option 3: Day Trading

In my opinion, it’s the perfect way to become wealthy. Here are ten rea-
sons why:

1.)It’s the total “equal opportunity” job

Your race doesn’t matter. Your skin color doesn’t matter.
Your education doesn’t matter, whether you’re a Ph.D. or a
college drop-out. Your sex doesn’t matter. Your origin
doesn’t matter. Your age doesn’t matter. Your background
and history don’t matter. Even if you’ve been in jail for
years, you could still make money with trading. Your lan-
guage doesn’t matter. Your looks don’t matter. And your so-
cial status doesn’t matter, as long as you have sufficient
funds to trade.

2.)No employees to hire

You don’t have to hire any employees, which means you
don’t have to worry about job interviews, payroll, employee
evaluations, holidays, sick days, or employee performance.
Your only “team member” is your broker, and if he doesn’t
perform, there are 10 others waiting in line for your business.

3.)No inventory, office space, or other equipment (besides
your phone and your computer)

You don’t have to buy or rent expensive office space, and
you don’t have to stock any products, which means you
don’t have to worry about expiration dates, damaged goods,
shipping, handling, insurance, or displays and promotions of

4.)No vendors, no customers, no invoices, and no accounts

You won’t have to deal with any face-to-face contact. You
don’t need any vendors, you don’t need to satisfy any cus-
tomers, you don’t need to provide any customer support, and


Introduction: Why Day Trading?

you don’t need to worry about any invoices, bounced checks,
fraudulent credit card charges, returns, or charge-backs.

5.)The time required is minimal

Whether you have a regular job or run your own business,
the chances are that you’re working at least 40 hours per
week. With day trading, you can trade either part-time or
full-time. You can start trading for as little as one hour per
week, or you can go for the maximum of 2 hours per day.
It’s your choice.

6.)Low capital requirement

You don’t need a lot of money to get started. This is not like
buying property, for example, where you’re on the hook for a
monthly mortgage and other cash-draining expenses. In
trading, you can start with as little as $1,000! (We’ll talk
about how a little later.)

7.)Returns are almost instantaneous

I'm talking "fast cash" in the sense that trading allows for
quick liquidation. You can convert trades for cash within
seconds. Where else in the world can you make money this
fast and comfortably? You can buy and sell and buy again in
minutes. You don’t have to wait to see your profits. Try this
with real estate or physical goods, where you might have to
wait weeks, or even months.

8.)Low transaction cost

You pay less than $10 per transaction in trading. Compare
that to real estate transactions, in which you have to pay sev-
eral thousand dollars in closing costs, not to mention a 3-6%
commission to your realtor.


The Complete Guide to Day Trading

9.)It's simple to learn how to make money with day trading

You don’t have to go to college for years. And unlike most
other professions, years of experience are not necessary ei-
ther. After teaching hundreds of people how to make money
with day trading, I firmly believe that everybody can learn
how to become a successful trader.

10.)You don’t need much to get started

In fact, there are only six things that you DO need:

a.) A computer
b.) An Internet connection
c.) A charting software
d.) A broker
e.) A properly funded trading account
f.) A good trading strategy

I could go on and on, but I think you get the picture. Throughout this
book, we’re going to cover a lot of material that will help you get started
with trading successfully. Here are a few of the essentials:

What exactly is day trading
Who should be day trading
Is it really possible to make a living as a day trader
What you need to get started
How much money you’ll need to begin trading
What markets are out there and which ones you should trade
How to develop a profitable day trading strategy
How to ensure that your day trading strategy actually works

In short: you will learn everything you need to know to start making
money with day trading. Ready?


How to Get the Most Out
of This Book

his book will help you become the trader you want to be, but it
won’t happen automatically. You will not instantly become suc-
cessful the minute you finish reading.


Making money with day trading IS possible, but it requires time, disci-
pline, effort, and commitment on your part.

Let me explain. Throughout the book, you’ll learn key concepts that you
can apply to your trading right away. The knowledge you accumulate is
extremely important, because it’s what you base your trading decisions
on, the decisions that will determine your ultimate success or failure.

One of my key goals in this book is to help you expand your trading
knowledge so that you can make well-informed decisions. I’ll provide
you with lots of valuable resources to help you learn what you need to

At the end of each chapter, you’ll find ‘Action Items,’ exercises relating
to the topics recently covered. If you want to get the most out of this
book, take a few minutes to complete these Action Items. The results you
achieve will, in most cases, be directly proportional to the effort and
commitment you invest in creating them.

It is my pledge to help you become the best trader that you can be, but
I’ll need your help to do it.


You're Reading a Free Preview

/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->