This article is an abstract
of the book:
The Complete Guide
is important to understand the difference between position trading
and daytrading. Position traders follow the classic buy-and-hold
strategy. They buy (or short) a stock for the long term. A trade
may last for several days or several years, consequently the position
trader doesn’t make many trades because his money remains invested
most of the time.
position trader profits from big market upswings that occur in a
booming market, but he can also suffer big price declines in a bear
market. His profit or return is the average price increase of his
stock investments. He isn’t concerned with smaller upswings or downswings
that may occur during a trading day.
however, uses a different approach to trading. He looks for interesting
price oscillations that occur during the trading day and is
content with much smaller profits than a position trader. His aim
is to make smaller profits but much more often. Daytraders usually
make more trades in a single day than a position trader may make
in a month or even a year.
daytraders make up to several hundred trades a day, thus providing
the market liquidity. Have you ever wondered who is buying when
a stock is plunging fast? Daytraders (and of course market makers).
Daytraders are responsible for almost one third of the NASDAQ’s
volume. They also help to narrow the spread significantly because
they are able to split the spread by using new sophisticated private
order execution networks.
with a direct access trading platform
a position trader tries to make several points profit with an investment,
the average profit of a daytrader is usually between 1/4 - 1
point. What he tries to do is make this profit several times
a day. Usually a daytrader doesn’t hold positions overnight; instead
he ends flat each day. So, every profit or loss a daytrader makes
is for real because he liquidates all his positions by the end of
we can say the narrower the time frame you are operating within,
the smaller the profit. “Scalping” a stock means to go in for a
very limited profit in an extremely short time, usually a few minutes
or even seconds. Scalpers look for an eighth of a point here, a
quarter of a point there, hoping to make small gains as often as
possible. In higher priced or fast moving stocks, one point can
also be considered a scalp.Scalping often doesn’t pay if you trade
with less than 1,000 shares, unless you try to scalp fast moving
stocks. A 1/8 point profit is 1,000 x 1/8 = $125 profit, minus commission.
You must be an experienced trader if you are trying to scalp stocks
because holding 1,000 shares of a stock can be very risky if the
trade goes against you. Therefore, the motto of a scalper is: Fast
in and fast out with a small but “sure” profit.
traders don’t scalp, but rather they look for a profit of at least
a 1-2 point in a particular trade. They may be in a trade for a
few minutes or as long as an hour. They make fewer trades than scalpers,
but seek higher profits per trade. Often a share size of much less
than 1,000 shares is enough to make a nice profit if you are a trend
trader. If you are looking for far more than a one point profit
in daytrading, you must consider holding for several hours, unless
the stock is moving fast or it’s a high priced stock. The advantage
with this is you can make a good profit with a smaller number of
amount of time a trader is involved in a trade, the quantity of
shares he uses and the amount of profit he makes, depend on many
different factors. A fast moving stock promises a greater profit
in a short time but also involves a higher risk. Larger share sizes
(1000 shares or more) bring greater profits but also higher losses
if the trade goes against you. You can make serious money with a
share size of 200-500 shares.
must be able to weigh up all these considerations and control the
risk. Being in constant control of the risks is the most important
part of being a daytrader. If you don’t know exactly what you are
doing, the money will flow out of your account very quickly. On
the other hand, you can make a considerable profit if you are self
disciplined and stick to the rules.
can take months before you become a successful trader, during which
time you can make several thousand dollars or you can lose money
every day, or even with every trade. To make a living, however,
you do not need to take big risks. Most daytraders believe
they need to trade the fast moving stocks to make big money, but
they usually lose money faster than they can make it. On the other
hand, you can make serious money by trading slower moving stocks
or lower priced stocks which are easier to control. If you focus
only on high percentage trading opportunities, you will consistently
make very good money, which is why we operate that way at Alert-Trading.
is a profession and a serious business. You must take it seriously
if you want to succeed in the long run. Nobody out there will give
you their money voluntarily. You must fight for it, and the better
you are prepared, the better your chances of success. You must do
your homework, learn the rules, train yourself to recognize the
patterns and become experienced in order execution. This book will
give you a comprehensive overview of everything you need to get
started. It covers all areas of daytrading and will guide you through
all the necessary steps. It offers much more than most other daytrading
books because it also teaches you a working trading system. It delves
deep inside the trading process and shows what is needed to make
a successful trade.
book is not written by theorists but by actual daytraders. Take
a look at the Alert-Trading chat room. There you can see traders
trading live using the style and system described in this book.
You can join the chat room during market hours and see with your
own eyes that the methods described in this book really work. You
can learn a lot from others while improving your own trading skills.
You will also learn to keep focused on the high percentage trades
and to stick to the rules.
book is your first step towards successful trading. It will help
you get started. Read it carefully. When you are ready, join the
chat room and let’s trade together!