restsnded sitting times.angle the monitors so there's no glare or reflection from outside fight or internalthe monitor faces comfortable
      
           
of your mouse pad. makes a big
      
with gel wrist restt get a $20 swivel chair with no arm rests, these
 
 
cold
   
Your Personal Daytrading Workstation Area: SUPPORT & ENCOURAGEMENT
e We all know that hope, greed and fear are what causes trading losses (be like Spock,completely logical, following predetermined rules, stop losses and techniques. For fun, goto acasino. Daytrading |s hard work, we're in this as a business). Here's how to keep thingssuccessful for you in terms of your mental preparation and what to have near your trace station
« First, make sure to have something like "Tight Stops - No Exceptions" taped to at least onemonitor.
+ Second, use encouraging success & motivational products, posters and other reminders on thewalls of your house/apartment where you can see them. See wwwy.successories.com for ideas.Rotate these things every few months.
« Third, make copies of intraday charts that you mace successful trades in (or screensnaps ofyour winning trade confirmations) and tape these to a board on your wall. | use the 3/46th inchthick 3'x 4' foam presentation boards available at office supply stores to mount things to at myhome office.
« Fourth, by analyzing your trade journal, find out what is helping you and what is hurting you andput reminders of these things near your monitors. Examples: "Don't trade from 12 - 1" "Don'ttrade more than 500 shares". "Wait til the momentum starts to turn, then sell "Small stops keepme trading - no more than 3/8 aaainst me" etc.Your Personal Daytrading Workstation Area: ORGANIZATION
“A Cluttered Desk is..." well, messy and mentally frustrating. Keep your desk area as clean aspossible. Hint for the chronically untidy (like me). atleast keep your primary trading area cleanof all clutter, and put all your papers on another coffee table or the floor, anywhere out of yourline of sight. Yhile trading, make sure your monitors, keyooard, clock and mouse are all thatyou are Seeing. Daytrading requires a lot of rental focus and concentration, make it easy onyourself by putting unneccessary papers and the like out of the way where you can't see themPut the TV behind you (or off to a side behind you), do not distract yourself with too muchCNBC. I like watching it too, butit's silent whenever I'm about to trade (which means it's muted80% of the time, frorn 9:30am til 11 30am). Putting the ty out of your line of sight helps youconcentrate on your charts, L2 and trading rg like you should, not CNBC. | rarely find CNBC auseful source of realtime trading information; | may put ane of their mentions (mostly Joe K's)on my watchlist for further action on a different day, but by the time CNBC talks about a stockit's usually far too late for daytrading. It used to be that a CNBC mention would move a stock4/2 point or so, now | find the time it takes listening to CNBC ys. the payoff of a play isextremely lowy, It's more for watching during lunch or on choppy trading days
Start over now and then: move your desk to an adjacent wall, put mirrors on the walls, trynew layouts and cornbinations to get one that you feel personally most comfortable withExperimentation is useful.
Your Personal Daytrading Workstation Area: RUNNING IT LIKE A BUSINESS:
Sure, trading for a living is fun; but it's also work. Make sure to keep your daily P&L (profit andloss; how much you made or lost each day) posted on a graph near your work areaRemember that, like all new businesses, you may be in the red for your first year or so That'snormal, what's bad is to have steep trading losses in the thousands of dollars that turn into"investments" because the stop wasn't taken soon enough This ties up your capital and costsyou maney. Look at many campanies, eg Sears, S, whase stock price has been slowly cut inhalf over the last year. Or QCOM, which has been selling off all year in early 2000. Don't makethe mistake of buying and holding for a long time if the trade violates one of your rules. Don't letwinners turn into losers, waiting and hoping for a comeback or turnaround. That's not how wemake our living at this, we dart in and out of positions
| put notes like "High-percentage daytrading for daily profits is Required, Ken! Continue toSucceed". Your mental frame of mind is so important to success as a trader; risk managementand trading techniques are critical to add to your skill set over time.
See trading as though you just hired yourself for 4 job - how would you look over your shoulderas the boss? If you're a small business owner like I've been it's automatic, you do it or nobodyelse does = WVhat measurable expectations do you have of yourself? How will you take itseriously enough to succeed ys hoping to make it rich on lucky trades (the "lotto" approachhah). Make no mistake, this is a shark pool you're swimming in, we're all here to take food fromit. To win, you must nibble more adeptly than the the others da.
"Internal ¥s external locus of control", psych 101, do you see yourself in charge of your fate, ordo you blame the market, your broker, the company whose stock your trading, everything butyourself? Winners see themselves in charge of the situation, losses are temporary. Losers seethemselves as victims and enjoy feeling bad, generating sympathy and blaming others. |sincerely hope you're disciplined and successful Tony Robbins and other authors haveexcellent books on the topic.
Step 1: Remove all non-trading/non business like artifacts from your trading area andworkspace (or at least most of them). Perhaps keep a family photo, or a photo of a tropicalplace you'd like to live, or ather incentive, in view as a reminder as to why you're doing this.Step 2: Do an erganomic check: make sure everything is well-done. Educate yourself an thetopic; if you're going to be spending hours in front of the computer like | do it's important to takecare of eye and wrist strain-related products and equipment layout for your health.
Step 3: Add the encouraging reminders and trading metrics/graphs to keep track of youractivity as a trader.
Step 4: If you want, submit 4 photo scan and we'll post it on the message board (or on thispage) for others to see how you've arranged it. I'l do mine when time permitsModuke = The Mental Game of Dayading: “@PREVIOUS NEXT ®Three
Back toMODULE 3
+ Dealing with Trading Lasses (alsa see the warksheet an this tapic)® Main Points:
A string of trading losses, or a “red portfolio", can have a serious damaging effect on yourability and confidence as a trader. Let's look at how to deal with losses in a constructive wayLOSS PREVENTION: As we've said all along, having small predetermined stops andsticking with therm is a prerequisite for your trading success.
LOSS RECOVERY: Many good traders can trade their way back up out of trading losses,particularly with all the profitable trade opportunities that exist daily in the market. Poortraders who do not resolve ta change their trading habits lose.
EMOTIGNS OF LOSS. Dealing with losses in a professional way, as a business person,helps you to avoid major problems. Small losses are a routine part of trading. Inexperiencedtraders take moderate to large losses, giving their money to other traders and institutions.EMOTIONS OF VICTORY: Celebrating small stops taken well should be a "new thing" youadd to your trading systern. Saying, "ok, | last $125 on a 1/4 paint stop of 500 shares" isgreat. Saying “aagh I'm down $850 on that ELOT tank, now I'm an investor” is terrible. Svoryour wins, don't take losses personally
Let's look at a few exarnples and illustrations here to help out
as j ji ‘You Should See Small Stops as aSmall Losses = A Cost of Doing Business ee ee
Do not try to be a perfectionist and expect perfect trades, itis an imperfect garne. You willnot buy the exact bottoms and sell the exact tops; you just want a piece of the actionEvery trader takes trading losses. The size of losses taken is what separates good from.poor traders. Resolve to take small stops, using TA, T&S and L2 indicators.
Small lasses should be seen as the "lights and water" bill of operating your store. If you'relosing a lot vs. winning you will not be able to trade for very long. Papertrade until you aregood at real trades, or at least trade small shares (100-200) until you're good at it.
You should look at the big picture, nobody likes losses, even if they're small. They are betterthan large losses though, it’s your daily (or weekly) P&L that counts. You can do fine justmaking 20%-30% winning trades if your wintloss ratio is correct. Eg for every 2 1/6th pointlosses you take you also get 1 S/& point win etc (ata minimum)
Small "cuts" are better than broken arms - learn how to take small stops quickly and re-enter the trade at 4 better time and price until you get it right. Maybe its a short not a lang -reverse your trading style if you think you are following the right trend.
Look at Moderate/Large Lossesas a Failure to Trade with Disicpline
Large Losses = Trading Mistakes
» Alarge lossis a mistake, no doubt about it, no sugarcoaling it. Sure, the keyis“did you leam from it", but let's not let that happen in the first place, okay?Alarge loss means that the trader was not fast enough, did not hold their stop,was impacted by a gap (for overnight/swing traders), or other trading event
The benefit of daytrading is that you can control your fades 100%, and are not
4 impacted by overnight news; the tradeoff being that you don't benefit from gaps
that go in your direction as well. Large intraday losses are nobocy's fault but the
trader's.
It helps to remember that a good trader responds, a bad trader precicts. Intraday
movernents are completely unpredictable, you must be early to respond to buy
signals and technical indicators, the tape/T&S and other things that tell youthere's more buying than selling going on in the stock for the timefrarne you'retrading it.
« Everyone makes mistakes, small mistakes are easier to deal with then big onesExample: look at your stock like you're on a date. Going on a first date that turnsout badly and then never going out with the person again is a smart “small stop".‘Going on a bad first date and continuing to see a person who isn't good for youand then end up marrying them hoping you can change them etc. and thendivorcing two years later is a “big loss” that should've been prevented early onSame thing with stocks - don't mary thern unless their technicals are showingbuying strength. speaking frorn an early personal experience there :-|
« Commit yourself to changing your trading habits and swallowing a small loss ismuch better than riding it inte the ground, or a margin call, or a fong-term hold,tying up valuable trading capital Get out early, get out fast if you're not rightKnowing when Not to Buy:
fo Eilfiversicrot EE Seale ay oe
Let's look at this NOVL chart, At notime in this trading day do you see anybuy signals of any kind
Yet, people were buying and selling thisstock all day long, The intraday buyerswere wrong, the intraday sellers wereright
The stock opened on a downtrend,consolidating in a tight range at 20 516x 38 for a couple of hours. Eventually,sellers win out as the price starts todtap As soon as we made lawer highsduring the range at 20 1/4 x 5/16 overlunch you knew the price was goingdown, and could have entered a goodshort. Shorts covered awhile later,causing a minor bounce to 201/8...which was unsustained, as theprice dropped back to the low of theday. Don't buy charts like this.
 
If you had bought on the open for somereason, where should your stop havebeen placed? As soon as it traded inthe 20 1/4x5/16 range
Remember our page on only going after "high-percentage" plays, ones that look like they're winners early enough to get someplay out of it. Avoid "indeterminate/can't tell" and "low-percentage" plays vs overtrading. An important part of trading for a livingModule = The Mental Game of Daywauing: *@ PREVIOUS NEXT
Back toMODULE 3© Maintaining a profitable risk:reward ratio in your trading
« Let's face it, daytrading is hard work, and you have to run it like a business ifyou are to profit and/or make a living at it. To help migrate from “gambling/playinghow and then before workhaving fun" into SUCCESS that's Consistently Profitable,enabling you to do this full time from wherever you wart to live, you've got to makemore than you lose, right?
It's very true that | can have 70% losing trades but be highly profitable at the end ofeach day, and at the end of each month. Tiry stops and larger profits is the key. Heymaybe | have to take 3 1/16th-point stops before | get a 5/3 point score... that'sprofitable for me. Or, maybe | want to scalp a slow mover for consistent 1/4s all day,that's fine too. | have much more often been happy that | sold too soon.
Here you will develop your risk:reward trading ratio needed to be effective.Remember that they are defined by each trader, depending on your trading style andobjectives, and must be such that your net wins are bigger than your losses. It's thatsimple, yet that difficult.
Think of it as though you're running @ casino: you want to set the overall odds slightly(hopefully largely!) in your favor over the long run of trade after trade. This means youmust have defined measures and a trading plan that you stick to no matter whattrade after trade. For every time you stop out and then watch the stock reverse andrun up you'll get 2 or more times that it doesn'L That's what knocks traders out ofthe game - allit takes is the "2 or more times It doesn't" to eat away your tradingCapital Play a slot machine with a 93% payout and you'll lose capital at the rate of7% of your stake, nibbling it down to zero. Don't be a gambler in stocks.
Instead, we'll take a highly disciplined approach that enables you to succeed at thisNote: if you're not a highly disciplined person who can't make rapid decisions withcomputer-like precision then daytrading is not for you - try swing trading/buyingmutual funds instead. .o Try playing games like Tetris that force you to make rapiddecisions one after another, it's been my favorite for years.
Examples:
Your Risk:Reward ratio is sirnply the ratio Ro
of the average amount you win per trade vs anglose per trade (or per trading day, or weeketc.) If you're losing 1/2 points and winning1/6ths you probably won't be trading for verylong, right?
‘You have to adjust all of this by the number ofshares traded, the stock price and the widthof the spreads for the stock being played ofcourse _
Let's look at the exarnple on the chart to thenight here, for NEQN. So let's say you bought1s at 57, thinking it sold off “enough” andwouldn't keep going down. Wrongl It keepsplummeting
 
Dida Hina in uneQuiz time! Do you:a) pray for itto bounce
b) watch like a deer caught in the headlightsof a car, frozen as the price drops out fromunder you
c) quickly limit your loss by taking 1/4 pointstop on the trade, admitting defeat quickly
d} decide "I'l hold on to this stock for a fewdays or weeks, it'll come back sometime, it'sa good company, nice analysts ratings, andthey just got into a deal with XYXcompany."
| hope you're a DTU trader who answers withthe correct choice c, we want to tradeagainst all the losers who trade like a, b andd. We take their money.
Daytraders' Play: For NEON, as soon as the marketproved you wrong you should've exited the position. Whylet a 1/4 point loss turn into a 1-point loss?
After letting the sellers finish, we caught a mini-doublebottom at 56, and bought the bottorn 3 consecutive timesfor scalps up to 57 resistance, before it broke through atthe end of the day. Very predictable stock pattern
See, our risk reward ratio in this case (1/4 pointloss to 1point win, on average), is 1:4..we win 4x as much forevery time we lose.
Think of it like this: if you have a 1:4 ioss:win ratio,every "win" you get "buys you 4 chances" to get itright the next time.
Bonus Quiz question: Where else could we havefreded fhe ebove chart Long besed an ea Key fachaicelindicator you 386 ? (answer: after the last buy/sell cycle where
you s6e 2 volume breakout indicated right before it goes thiu 57again)
Setting Your Own Risk:Reward Ratio for your Daytrades -
‘You must, for your own trading style, determine the following
Once you're in a trade, where is your predetermined stop point at? Use either a keysupportresistance level, or a "trading standard" that you use. My stops are always no more than 2 spreadsaway from where | bought the stock at. Also determine “where's my trailing stop at"? (For example, youbuy NOVL at 35 1/8, it goes up to 36 1/2 (now you should have a trailing stop at 35 1/4 etc.)
Why? Because for me to make money | need to have at least an absoluteminimum 3:2 winlloss ratio, meaning that every time | lose 2 spreads | need to.make an equivalent trade (volume of shares etc) that gets me a profit of 3 ormore spreads. With commissions, trade slippage and other factors | prefer toshoot for a 3.1 or 4.1 target).
Like Serge Milman says in Electronic Daytraders' Secrets (FriedfertigWest},“these guys are killing themselves losing points and making quarters".
The first cutis the cheapest one, you have to determine for yourself how far to let a trade go againstyou before bailing out. | am almost never disapponted in myself for stopping out with -1/8 or - 3/16 or -4/16 stops all the time. My broker likes this of course; | try to maneuver for high-percentage trades, anddon't mind "trying for the win" a few times, even if| take a few small cuts before | nail a 1/2point+ tradewiS00 shares.
Of course if you're playing JDSU DISH QCOM DCLK etc then adjust these for the 3/8-point spreadsthese stocks can trade in. The main thing 1s to set 4 stop at no more than 2 spreads aways from whereyou bought in (or at least 2 spreads down from the inside bid) If I'm that wrong about a trade itllprodably get uglier before it gets better.
"The best trades are usually right from the start". eg. | bought the bottom of WCOM on Friday1121/2000, nailed it exactly for 500 shares and made $187 in 7 minutes. Boom.
But, | kept fishing for bottoms for the rest of the day In WCOM and gave back most of my $187 incommissions :{. Should've taken the money and run, waiting for a breakout above resistance. However,Itraded the bottomfishing correctly in that | kept 1/16th point stops. YYCOM never did run more than thatfirst successful trade | made.To make a long story short, | made $187 on the winner, and lost from $30-$45 a couple of times on thetimes | wasn't right. A breakeven afternoon in VWCOM, but at least | managed the trades correctly. Justgoes to show you we all make common trading errors, mine was In violating the "clan't overtrade" rule.
At least it was fun. And wow look atthose 1-second order executions
Buy using limit orders,sell using market ordersin fast-moving stocks.
, Ok, your tum. Pick any 3 stocks you trade regularly, and write out on 4 piece of paper where thea key 5. and 10-day support and resistance levels are at
Now, write down what your stop will be if you bought a breakout above a key resistance level
Finally, write down how far you want to trail your stops at (I generally use 2 spreads, maybe 1 ifIm trading in size, eg over 500 shares)
As always, papertrade it for a few days to get the hang of it, then trade with srnall 100-300share size trades just for practice.
Remember that you can always get back in a stock if you stop out, it climbs down somemore, and starts to rebound on volume. Or, if you sell with a profit in an uptrend and it breaksthrough some key resistance level after pausing for a bit, doing a "snake".
One of the key things I had to learn was to not think in absolutes, saying to myself "welll tried tobuy WCOM and | missed it so now | wan't trade it anymore today" Instead, be a fighter and ifyou still have the initial reason to enter the trade in motion in the market for that stock at thattime, then try again
  
breakoutk Keep
Best wishes!
Module fhe Menicil Gasiie of Daylrading @PREVIOLS NEXTBack toMODULE 3
Disciplined Trading: 10 Practical Tips to Stay Ahead of Trading Losses
® Main Po
 
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—_ Tip #2 Define your stop and exit target before buying or shorting.
      
  
ee ne Up «profit be—, Tip #2: Prepare for each day you intend to trade both mentally and physically.
—~ Tip #3:
C Tom
CO Tip4s:
‘You have to take a bit of time to get yourself geared up to trade. Trading scared, tradingtired or trading with anything less than your full concentration will lead to losses. You maywant to start by trading only several days out of each week instead of trying to play daily.
Physically, you should take care of yourself: eat some carbohydrates in the morning, notjust coffee, eg toast, a microwave baked potato or rice for energy. Take 4 few deepbreaths, stretch your body a bit Go for a walk during the lunch hour
Mentally, you should do your DD (due diligence) and prepare a watchlist for the day prior tothe open; once the market has opened also keep an eye on the % gainers/losers/mostactives for shorting and bounce opportunities. Get your mind In shape to trade bypracticing with a tracing simulator or other paper-trade device. | find playing tetris-typegames keeps my mind alertto develop the rapid decision-making ability needed todaytrade effectively. Get "Tower of the Ancients" at www fiendishgames.com, for example
Finally, if you're not up to trading on one particular day, then don't. Take the day off. Themarket will still be there tomorrow.
Scale back your trade sizes if you're losing consistently.
Nothing can be more mentally devastating than a string of losses. Things seems frustrating,and you're worried about losing even more capital. You want to "get out of the hole and atleast break even"
To get there, you need to’ 1) review why you lostin the first place’ eg was |tthe stocks youplayed (Ike cheap $5 chatroom pump n dump specials), was it lack of discipline to keepsmall stops, lack of knowledge of level 2 or chart patterns. etc? 2) papertrade til you are atleast 40% successful with your choice of trade entries and exits 3) start back in the game bytrading just 100-200 shares (or less, for expensive stocks) 4) work up your share sizes backto 500-1 shares after you are effective for at least a few weeks using 100-200 share sizetrades
Gain more knowledge, regroup and resolve to re-educate and re-train yourself.
Learning frorn others who've made it can be 4 big confidence-builder. | find if I've lost and I'mfeeling down | re-read the "Secrets of Successful Daytraders" by Friedfertig’WVest | enioyreading the attitudes and intensity that these guys have in the stories they share Everyonehas different books they like; make a commitment to building a library of "defensiveresources" to help encourage you to examine your errors and commit to more successfultrading habits.
Much of what you need to be successful is in the subtleties that are not included in many of thebooks, I'm atternpting to bridge that "intermediatefadyanced practical gap" with the DTUcontent. But, the trading basics and friendly authors' voices in many of the books out there arehelpful for encouragement anc to help you get back on track. Buy a bunch of daytrading booksfrom Amazon.com and return the ones you don'tlike. Also, get some of the tapes from lastyear's daytrading expo at hitowww. onlinetradingexpo.com/recordings html and therecordings atwww.worldwidetraders.com in the members’ area. | find listening to othertraders as well as reading their words is helpful Tell them | sent you
Get in touch with other daytraders in your area.| Vip #6:
CO twa:
If there is no group, consider starting one to meet and share trading strategies. Tim of“Daytraders of Orange County" started the big chapter down there, see if you can get aninformal monthly meeting at a local restaurant started to swap daytrading strategies andtechniques with others. | plan to start up a chapter here in Hawail if | have time (hah), you mayhave luck by contacting others in your area
The worldwidetraders com has geographic contact info. for other traders in eachstate/country, start by ernailing others, perhaps phoning a few local brokers to see if theyknow of anyone who daytraders that would like to meet every now and then. Daytrading canbe a lonely job; it's good to share and get encouragement from others
Change the stocks you trade, and narrow your focus.
An ongoing personal trading challenge | have is to keep my list down to under 20stocks | watch each day, it's entirely true that you can make a living daytrading asingle stack (or a small group of 1 -5 stocks)
There's so many to choose from it's tough to limit yourselfl It's kind of like going to anightclub or bar with a lot of women to dance with; you have to choase carefully oryou might get a bad one (ok I'm stretching, but you get the analogy). (*_")
It's easy to get in the habit of following a few "favorite stacks"; but you must exercisediscipline and ask yourself questions like "ok, of the last 5 trades | cid with this stockhow many were winners, and what's my profit and loss trading that stock?". Sinceyou now know to run your trading like a business, you must cut that stock loose andnot trade it anymore if you aren't successful with it. Many stocks are very difficult todaytrade consistently (like INTC MSFT for me, at least); remember to pick stocksthat meet ourtrading criteria
Change the stocks you trade, no matter how much you "like them", if they aren'tmaking money for you. Some stacks are difficult, low-percentage stocks to daytrade.Recognize this and move on, For daytrading | like CIEN NOVL DCLK AMZN SPLS,for example. Your mileage may vary, e.g. try stocks you tend to do well with
Experiment with different trading styles; e.g. go to swing trading for awhile.
It your daytracles are losing you money, you might want to try a different trading stylefor a couple of months, eg fade back to swing trading (buying and holding from 2days to a week or more, depending on when a good profit is reached).
Many traders are more effective at swing trading and investing than they are atdaytrading. Make sure you do not mix the two trading styles, however! Your stopsare generally looser for swing trades, and your profit expectation is also higher Inswing trades, you will carefully use the 5- and 10-day charts, along with standardlonger term indicators like the 50- 100- and 200-day MA lines for support andresistance You willbe keenly aware of earnings dates for not only your stock butthose of major customers for the stock you are buying that might impact your stock.
The key is to not mix the two and treat your swing trade like a daytrade. Sure, if yourswing trade runs up and you make a good profit then take it (eg | recently swingtraded DBCC from 8 1/2 to over 9 and took profit when it locked good}
0 Tip #82 Don't “average down" (adding to losers) or use other bad trader habits.
“But it worked for me the last time | did it", you exclaim Vell sure, and Tennessee gotto the playoffs this year too, but over time it will not work. It's ok to add to your winnersin a small pyramid (eg buy 500 at44 1/8, add another 200 at 44 1/4, sell thern all at44 15116). Do Not average down (bought 200 at 33 1/2, bought another 200 at 33‘cuz itlooks cheap, bought 500 more at 31 because | know it can't possibly go anylower than this, then capitulate and sell them all for aloss at your 30 stop After which,of course, itrebounds,}. Sound familiar?
Don't do it, just say no to "averaging down", a loser's way of playing the market. buystrang stocks, sell weak stocks. It's like golf, you need to get nd of bad swing habitsthat cause Slicing, in your daytrading you have to eliminate losers’ trading habits likeaveraging down, even if it did work for you on a couple of occasions. Also avoidtrading on choppy, low percentage days, or during the lunchhour {in general).
oO Tip #9: Change your trading environment drastically.
Go buy a better chair (I use a leather execs chair wwbuill