a get rich quick
scheme.  The truth is that stock trading is a longevity business based on
consistency, capital preservation, and the building of equity.  It takes confidence
in your strategy, planning, and risk taking to pull it off.  You’ve got to be willing to
accept small losses and able to keep them at a minimum.  This idea may not suit
well with you, but consider the alternative, suffering huge losses.  Why?
Because you must be realistic enough to understand that you can’t possibly win
every trade no matter how good you think you are or how much you’ve studied
and know.
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Remember that consistency is another key ingredient to your over all
success as a day trader.  Just as you may be experiencing a few minor losses
here and there, you may experience consistent small wins.  This is not a
discouraging thing.  So what if you notice a few winners cashing in on the big
bucks?  Their winnings might have been from pure luck and less likely to happen
again.  Your small steady wins are from a well-developed strategy and will likely
happen over and over again.  That’s the difference between a one-time success
and a lifetime successful career.  What you are doing is demonstrating the ability
to accumulate equity.
It would be a grave mistake to change your decisions based on the wind
and frolic behind other winners racing to the cash register.  They may be having
luck now, but even luck runs out at some point.  Ignore this temptation as best as
you can and go with your instincts and what you know.   Don’t allow your
emotions to override your instincts.
Patience
Know when to take a cut on your losses and leave the game.  It doesn’t
make you a quitter.  What it does is preserve your capital for another trading day.
Good poker players know when the stakes are too high to play against.  They
fold before it gets worse, taking their losses or their wins without tempting fate
any further and moving on.
Part of having patience in the stock trading world is being able to stand
back and take time to observe the market with objectivity.  The other part of
patience is having the discipline to execute your plans.  This involves all the
emotional elements of accepting and recognizing risk, managing trades with
confidence, and exercising patience through analysis, objectivity, and making
your moves through steady execution.
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It isn’t easy to preserve equity and accumulate it over a sustained period
of time, especially if we think we could do so much better, faster.  As people we
always want things NOW!  Good things really do come to those who are patient.
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Day Trading Strategies
Only an immortal trader would be able to accurately predict the sway of
the stock market and win every trade.  Since this is highly unlikely, we are left to
rely upon our experience, knowledge, risk management assessment, and
strategies of various trading styles to survive and prosper in an ever-changing,
unpredictable market.  While consistency is very important to succeed in the
stock market, it is just as detrimental to be flexible.  Think of a tree with deep
roots that is so stiff and solid during a howling wind that its trunk is unbending
and snaps from the intense pressure.  However, a small weed with roots will
easily bend to the wind.  The difference is that it doesn’t snap, it isn’t uprooted,
and it’s still there in the end.  The goal is to develop a systematic trading style
that works for your needs, meets your personal expectations, and brings about
success as you define it.
The three basic styles are scalp, swing and core trading.  While all three of
these trading systems have consistent elements and characteristics that identify
them, their core ideological structures goes very deep and beyond the basics.
Even though you are likely to develop a particular style that you prefer, a good,
solid education on all trading styles with the ability to use them interchangeably
as needed brings an overall approach to stock trading.
Scalp Trading
Scalp trading is a way of profiting from price fluctuations in the stock
market.  These trades are usually fast and sometimes difficult to judge, lasting
from seconds to mere minutes with only 0.125 to 0.5 point gains.  When just
beginning, trade with small shares to reduce the cost of learning as you gain
experience.  Think of it as baby steps.  Most people that put on skis for the first
time, wouldn’t likely climb the highest mountain in Denver, Colorado before at
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least attempting a few beginner slopes.  Find a few your beginner trades before
you jump into to the market full force with challenging profits in mind.
This kind of adventure requires gaining experience the old-fashioned way
through trial and error.  Due to the quick time frame of scalping, there are various
levels of risk-rewards ratios and strategies used.  The best scalp traders have
trained themselves to think quickly on their feet and to place numerous orders
like second nature.  Hesitation is always a risky cost in the stock market, but
even more so when scalp trading.
Before you even begin a scalp trade, do your research on what’s
happening in the market.  Once you’ve narrowed the market down to a few
possible targets, check the daily chart for resistance levels.  If it’s only ¼  to one
point away, abandon this target and find another one.  You want a target trade
with more leeway than that.  Remember that you are looking for opportunities
with low risk and high earning probabilities.  A trade already near the resistance
point greatly decreases your profitability.
By now you realized that charting is very important and necessary to
determine your trades, market trends and what steps you want to take next.  You
must have access and take the time to review the entire chart so that you can
see exactly how the up-to-minute trades are affecting the stock.  Be sure to
check out the following issues:
•  Today’s highs and lows•  Yesterday’s highs and lows•  Gaps from yesterday’s closing price to today’s opening price• 
Include yesterday’s critical pivot areas
When scalp trading, only risk as much as 0.125 spread or less.  This
reduces your risk, especially if you are inexperienced or uncertain of where the
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stock is heading.  Such trading strategy is designed to win a fast profit and exit
quickly.  It’s very necessary to capitalize on breakouts and breakdowns while
they are in full momentum.  Scalping is an attractive trade to many because the
risks are smaller.  While this may seem logical and cautious, scalp trades happen
very quickly and add up during the day.  These small risks in multiple numbers
turn into huge losses once they are calculated into one large lump sum.
There are a few strategies to consider when setting up a scalp trade.   Try
your best to consolidate near the day’s high.  This may not be possible early in
the morning, but toward the afternoon as market fluctuations occur, good spikes
appear on the charts, ripe for scalping profits.  As the stock moves, you should
follow sideways in a steadfast manner.  You have the option of buying on the
breakout point at 0.125 point above resistance, which is probably easier.  Your
other choice is to buy right before the breakout, but this step is more difficult and
requires precise timing.  If you are too early, you risk the possibility of the stock
reversing.  One guaranteed strategy would be to buy only half your planned lot
size before the breakout, and the other half at the breakout moment.  When you
make a profit, you can sell the first half.  If possible, allow the other half to rise
one or two levels higher.  This way you covered either way.
Whether you plan to scalp as a day trader full-time or part-time, use the
following considerations to play your game:
•  Profit Objective – Gaining small profits on temporary price
fluctuations that occur throughout the trading day.  Scalpers
must have the ability to recognize the momentum of order flows,
jumping in the trade right as the price fluctuates and risking no
more than the intended gain and then getting out fairly quickly.
Otherwise, you risk prices moving against you.
•  Frequency – Since the profits in scalping tend to be smaller,
the frequency of such trades are higher.  This means that
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scalpers increase their commissions by performing more trades.
Resist the temptation to over trade, especially if you aren’t
99.9% sure of making a consistent profit.
•  Time Intervals – Generally, scalp trades only last from a few
seconds to a few mere minutes.  They can last as long as a
couple of hours at the most, but this is more rare.
•  Order Placement – The success of scalping tends to evolve
around placing the orders.  Because scalping is a very fast
process, your ability to get in and out of a trade is detrimental for
making a profit.  You must be able to think quickly and act with
speed.
•  Software & Network Connection – Again, speed is of the
essence.  If you don’t have a fast enough connection to the
Internet to gain access, expedite orders, and receive timely
information in real-time, you are defeating your purpose of
scalping and probably losing money, or else you could be
profiting more.  Likewise, your software program should be
efficient and fast in making calculations, producing charts for
viewing and toggling to screens without delay.  You can’t make
fast, effective decisions if you don’t have timely access to the
information on which you are making decisions.
•  Competition- Specialists and market makers representing
themselves and huge multi-million dollar corporations are not
only equipped with the latest cutting-edge technology, but they
are very intelligent, savvy individuals who happen to be your
competition.  Sometimes an overcrowded market leaves very
few slices of the pie.
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As there are a few favorable conditions to look for when scalping, adhere to
the don’ts below:
•  Don’t be Biased – Refrain from making market determinations
without sufficient evidence.  Let the market show you what it’s
going to do.  Analyze the factors that may or may not prevent a
stock from going in one direction or the other.  Stay neutral and
watch things closely so that you will be prepared to take action
as soon as the direction of the market becomes clear.
•  Don’t Chase – Tracking the progress of moving prices is not
the same thing as chasing it.  Keep your position if a stock
suddenly moves several levels.  The larger a leap, likelier the
fall.  You don’t want to be caught in this thunder twist.
•  Don’t Bring Home a Scalp Trade – Scalping is too quick and
over night changes completely unpredictable.  Before the end of
the day, take your profits and cut your losses where they are.
Tomorrow is a different day, and a different game.
Swing Trading
Think of swing trading as a strategy, utilizing the benefit of a trend in the
stock market.   Generally, a swing trade lasts longer than a scalp trade ranging
into a few days.  Usually swing traders are loyal to the trade, staying with it
throughout the ups and downs of price fluctuation.  This allows the trend to
develop its course.  Swing trading is less energetic and intense than scalping or
other trading styles.  In fact, it requires quite a bit of patience, more so than many
other various trading styles.  Swing traders search for intraday trends or trend
reversals so that they can capitalize on price moves.  The typical day of a swing
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trader is greatly stimulated, if they are successful in catching a moment that turns
out to be more than an impulsive fluctuation from daily orders.
Swing trades are not only different from scalp trades because of duration,
but by the way they develop and how the market perceives them.  Most swing
trades are born from pattern and trend observations calculated and tracked on
daily charts.  These tracking procedures may actually take place over a span of
several days with 15 to 30 minute intervals.  Often stocks in upward trends will
continue to go up for three days and then pull back for two days, or up for five
days and then down for three.  The numbers are the same but reversed for
downtrends, whereas down for three days and then up for two.
It’s a good idea to set your initial stop to ¼ below the day’s entry low.
Continue to adjust your stop each day as the stock moves up at ¼ below that
day’s low.  One positive way to determine when to sell on a swing trade is when
the stock’s uptrend has made two pullbacks or downtrends and then two very
distinct highs.  You can manually draw a line at each break point, connecting the
dots.  Your stop loss, the point at which you will stop the trade to cut your losses
and take your wins, should be at ¼ a point under the bottom line.  If your stock
falls below this line, sell.
NASDAQ Intraday Trading Chart from the NASDAQ Web Site.
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The latest software technology has made tracking swing trades more
accurate, efficient and easier.  Links are possible allowing stocks to be viewed at
the simultaneously from more than one perspective.  You can compare and
cross-reference daily charts to intraday chart patterns, including other chart
types.
The ideal swing trader is up-to-date on current trends and very familiar
with the public’s sentiments.  If you anticipate a bold, continuous trend in the
market, you can then search for strong stocks with the likely possibility of
breaking out beyond any previous resistance points.  Even with all the new
technology and interesting perspectives available to us, finding swing trading
candidates can still prove to be difficult.  You may literally search through
hundreds of charts before discovering a few matching possibilities where the best
conditions for the best risk-to-reward ratios exists.
The following are a few scenarios to watch out for in swing trading:
•  Use S&P 500 Index for Starting Point – Watch the index for
trends each day, marking the pivot points, and viewing various
charts for several perspectives.  Be especially attentive during
the last hour of trading each day.
•  Target List – Create a target list of possible swing trades with a
significant risk-to-reward ratio.  Begin your search with the S&P
100 and the NASDAQ 100 indexes.  Then cross-reference your
choices from various charts and narrow your list even further.
Be patient and don’t force patterns on your tired and weary
imagination.  Real trends will be obvious as you go through your
search.
•  Chart Trends – Keep consistent charts on recent plays and
various trends, noting any gaps, all averages, resistance levels,
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and critical pivot points.  Include daily charts for technical keys
that are specific indicators of averages on the move.
•  Remember Key Fundamentals – Be on the alert for news with
impact in the media that may boost or drop previous trends in
the stock market.  Stay objective and while you estimate and try
to predict the fluctuation effects.
•  Exercise Discipline & Patience – Set an entry point and a loss
point and stick to it.  The idea is to minimize your losses,
preserve what you have for tomorrow’s exchange, and to
eventually win when the time is right.  This is more of a mindset
than anything else, but because you are in control of your
market actions and choices, and no one has to know your
intentions, it’s very easy to change your decisions.  Don’t
succumb to the temptation to waiver in your preset decisions.  It
not only puts you on an indecisive track, but undermines your
trading confidence.
• 
Ignore Greed – Even if the stock you are trading has moved in
your favor, you haven’t made money until you have officially
closed out the trade and completely eliminated further risk of
loss.  Remember that a small win is better than any loss.  Again,
exercise discipline in cutting your losses before they grow worse
by waiting for an upward trend that might not happen, or for
confirmation that it’s all over.
•  Scaling – Trace the stock as it moves forward in your favor,
similar to trailing succinct pivot point stops.  Be proactive in
protecting your losses, not reactive when it’s too late.  In other
words, it’s better to be defensive than to suffer heavy losses.
This requires exiting the trade if you are on the losing side and
unsure of which direction the stock may charge.
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•  Overnight Positions – Since swing trades generally last over
the length of several days, often it’s necessary to stake a
position overnight.  Stocks even change overnight, so it is in
your best interest to not close the day on a losing trade or with a
particularly high trade with a large percentage share.  You need
to leave room in either direction for market gaps and
unexpected reversal trends.
Core Trading
Unlike scalp and swing trading, core trading takes advantage of situations
in the market that require longer lengths of time to develop.  For these types of
trades, market assessments and decisions are generally made after market
hours due to the busy activities of the trading day.  Both detailed fundamental
and technical analysis are very important before executing core trades.  The
challenge of core trading tests a trader’s skills at stock picking and predicting the
future of stocks.
Traditionally, speculative technical markets have provided the conditional
environment necessary for core trading.  In many historical cases, the length of
time for developing stock for a new business could be as long as a few months to
a few years, while core trades are generally a few days to several weeks.  These
trading methods may require significant patience, but the possible profits from
these markets are too great to ignore.  Other key benefits to use core trading is
for traders to hold specific positions as we wait for dominant trends in the market
to further develop.
The following are necessary elements to remember when core trading:
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•  The Core Trade Mindset – Since a longer period of trade is a
consideration, you must keep in mind the larger price
fluctuations by staying in tune with the overall perspective.  This
is very different from swing or scalp trading in that you need to
be as detached as possible for the busy intraday trading issues.
The idea is to think more and react less over daily fluctuations.
•  Separate Accounts – As an active day trader, you may be
involved in scalp or swing trading in addition to your core trading
activities.  Having separate accounts for the your intraday
transactions from your core trading actions will be easier to
maintain, including the prevention unnecessary errors as you try
to calculate your daily profits, losses and costs.
•  Dominant Trends – On a daily basis check the major market
indexes such as the S& P 500, the NASDAQ composite, and
the Dow Jones industrials.  Specific stocks can either be up,
down or moving to the side.  If the market is on an uptrend, buy
pullouts and breakouts.  If there’s a downtrend, simply do the
opposite.  A sideways movement means the market is treading
on uncertainty. In this case you need to maintain tight stops and
go for the smaller profits.
•  Look for Strong Targets – Choose potential targets that are
breaking out with a history of good performance during bear
phases.  If it’s possible that the market is moving toward a
bullish market, these type targets may be a better investment.
•  Cheap Stocks – It may be tempting to purchase the bottom
picks, but it isn’t necessarily in your best interest.  Try to
maintain the rules of trend and manage your risks in buying the
stronger stocks and selling the weaker ones.
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•  Technical Analysis – Follow daily and weekly charts on
technical indicators in the stock market.  Know the resistance
levels, the moving averages, and volume trends.  After you set
your stop loss based on this information, stick to it.  Technical
analysis is often tell you more than fundamental analysis.
•  Fundamental Analysis – Fundamental news and analysis is
often beneficial as a cross-reference with the information you
derive from you technical analysis.  Also, a very important news
can promote a dominant effect or trend in the stock market.
•  Wide Stops – Keep your reward-to-risk ratios realistic with the
stock movement and as key market trends shift one way or the
other.  Continue to set your stops and exit points according to
resistance levels from your technical and fundamental analysis.
•  Small Bets – Small bets always keeps your risks lower than
larger bets with more to lose.  Several small winning trades
could add up to a large, significant profit.  The benefits of small
bets include: 1) You can build a large trading position by adding
to a little at a time as the market swings in your favor. 2) If the
stock moves against you, it’s easier to exit at a faster pace.
•  Technology Issues – With technology always moving forward
in leaps and bounds, especially in our day and time, consider
any technology-related issues.  This is the market where you
can usually find many of the large price moves.
•  Stock Knowledge – Core trading requires significant
understanding of the stock’s nature such as the products and
services that the stock’s business is involved.  Necessary
fundamental knowledge is very valuable, and therefore, requires
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a great deal more research and analysis than swing or scalp
trading.
•  Decisive Exit & Entry Points – Even though core trading is
significantly different from swing trading, the knowledge of
intraday price swings will still be helpful as you determine a
down momentum or an approaching rally in the market.  These
market forces produce the relative points at which you choose
to enter and exit a core trade, thereby a huge factor in your
success.
•  Go with the Flow – Don’t ignore or balk against trends that
could significantly increase your losses.  This is self-destructive
behavior that could end up being very financially painful.  Take
advantage of the financial opportunities that trends provide
instead of moving against them.  When the trend dies, you can
move on.
Short vs. Long Trading
Long trading is when you buy a stock with the intention of later selling it at
a higher price.  Shorting stock is when you sell stock with the intention of later
buying it back at a lower price.
Short trading appeals to many on the basis of market cycles, in which
downtrends are virtually unavoidable, falling faster than they tend to rise on the
uptrend.  The disadvantage to short selling is the fact that the market will
eventually always swing back up, which increases the price of the stock you
intend to re-buy at a lower price.  Plus, not all stocks are available for shorting at
all times.  For instance, you cannot short a stock on a downtick.  Shorting is only
possible on upticks.  These rules are were established by the exchanges to
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prevent market sell-offs from occurring as they did in 1929, throwing the U.S.
economy into a deep depression along with many other factors.  Please note that
specialists and market makers are exempt from this rule.
One clear way to tell whether or not to sell short is by reading charts,
documenting market indicators with Bollinger bands.  These are exponential
bands with two standard deviations, measuring high and low volatility levels.  A
stock price at the top of a Bollinger band is very likely to drop down to its lower
Bollinger band – A good indication to sell short.
Wide bands indicate high volatility, while narrow bands indicate the
opposite.  You want to monitor the moving average (MA) until it reaches a double
top in the shape of an M.  This is an indication of a major drop on the brink and a
potential setup for selling short.  What is happening is the stock in an uptrend is
weakening.  It reaches a high point, sells off for the slight dip, and then reaches
another high.  The second high point cannot break through the resistance,
reaching past the point of the first high.  Stockholders grow a bit nervous and
begin selling off, plummeting the stock into a downward slope.
When choosing a stock for a short sell, look for steep rises.  This indicates
that the sharper the incline, the sharper the drop.  Also, the less support a stock
has, the further it will fall when the drop comes.  The moment a stock penetrates
the support resistance, trading at 0.125 below that mark, you need to place a
limit order selling short the desired amount of shares at the inside offer price.
Here are a few DON’Ts when considering selling short:
•  Don’t sell a strong stock short if it happens to be in an uptrend.
• 
If you think a stock has risen too high, don’t short a stock based
on that reason alone.  Many traders have a history of getting
burned on such loose reasoning.  Use the straight facts from
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market indicators to make decisive determinations in whether or
not to sell a stock short.
•  Likewise, don’t ever sell a stock short simply because it takes a
dip.  If you’re looking for an indication that a stock may be
weakening, it isn’t necessarily at the first couple of lows.  Wait
until it trades for a 30-minute low before you consider selling
short.
•  As a new trader, you should avoid scalping shorts until you can
a reasonable amount of experience.  The reason for this is the
risk factors are very time consuming with difficult entry points,
and often very imprecise fluctuations.
• 
It is unwise whether you are trading long or short, to trade a
stock with very little volume such as 300, 000 daily shares.
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Market Analysis
Fundamental Analysis
Whether or not they will admit it, every trader uses fundamental analysis
to make stock trading decisions even if only in a broad sort of way.  It focuses on
the study of economic, social and political issues that affect the stock market.
Fundamental analysis specifically relates to the stock market through the process
of monitoring a stock’s annual growth rate.  That’s why investors and traders
chart stock profits by various time periods such as daily, weekly, monthly and
quarterly.  They look for price-to-earning ratios known as P/E.  This figure can be
derived by dividing the stock’s price by its per-share earnings.
Fundamentalists are more concerned with a stock’s annual performance
than in overall market behavior.  Daily fluctuations do not matter, as they
concentrate on the steady, continuous growth patterns.  These investors are
looking for long-term profits as retirement benefits, children’s college funds, and
such investments.
One of the reasons that many people do not like using fundamental
analysis is because of the time, effort, and energy that’s required when
researching and studying the market.  However, even fundamental knowledge is
significantly beneficial to day traders, especially when combined with the role of
technical analysis.  For instance, having good fundamental knowledge of the
market enhances your ability to interpret news announcements and key
headlines to determine a price swing.  Fundamental knowledge is even more
significant when technical uncertainty is clouding over.
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The combination of both technical and fundamental studies not only
increases your knowledge but can boost your confidence.  Fundamental factors
often supplement technical pricing, which in turn greatly increases your chances
of being right.
Making correct interpretations in an allowable time frame to make your
decisions count, puts you a step ahead of everyone else.  It doesn’t help much if
you can’t interpret the market in time to act.  This is one aspect of stock trading
that sets the professionals a part from the amateurs.  They have their momentum
down.  They pay attention, think quickly, interpret even faster, and their decisions
are automatic, kicking them into motion.
Technical Analysis
On a deeper level, technical analysis concentrates on evaluating time, price
and market sentiment.  Technical analysts rely heavily upon the usage of charts.
They use them to determine how many shares have been sold in a day, a week,
or a month’s time.  Traders using this method of analysis, generally decipher a
stock’s strength by the moving average of the stock’s price.  This can be
determined by averaging the closing historical prices.
Technical Analysis is also an excellent way to obtain up-to-second status
accounts on equities and other market indicators.  Day traders pay special
attention to current market indices, which may give an indication in which
direction the breezing market may blow next.  A few of the most popular indices
are the S&P 500, Dow Jones Industrial, and the NASDAQ Composite.
The quick delivery of news is essential as traders try to correctly interpret
whether or not to quickly buy or sell, or to simply reverse positions.  Of course,
“timely” is the key here.  Traders try to beat all the other traders before the
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information spreads to the market majority of investors.  News that sometimes
changes the order flow during the intraday period is stock split announcements,
relative lawsuits, merger deals, and some stock buybacks.  The idea is to take
advantage of these opportunities in a profitable way.  Again, the best sure
method of increasing your profitability in this uncertain and unpredictable market,
is to find a comfortable method of market analysis that combines both the
fundamental and the technical aspects of trading.  Your personal system won’t
develop overnight.  It will take practice through trail and error, but eventually
you’ll begin to get the feel and gradual flow of a trading momentum all of your
own.
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Day Trading Online
As discussed in an earlier chapter, the Internet has revolutionized many
industries, and the stock market is no exception.  Many changes have taken
place in the markets since the invention of the Internet.  Whether you intend to be
a part-time or full-time day trader, with the advancement of the latest
technologies, you now have the advantage of trading right at home or within your
office.  All you need is a computer with an order entry software system that has
an Internet connection via a cable modem or a dedicated phone line.
 Previously, only stockbrokers, specialists, and market makers had
personal access to the market and for placing orders, but now everyone online
who wants access to the stock market can have it.  You can sell and buy stock
right online without every having to call a broker or making an inconvenient trip to
a local stock exchange firm.
Online Resources
The number and variations of online resources can frazzle the mind and
everyday more and more sites are uploaded to the Internet.  Resources range
from informational Web sites, online magazines, online educational sites, to
interactive trading markets.  That doesn’t include online publishers where you
can purchase stock investment books from sites such as barnesnoble.com or
amazon.com or financial and media business sites.
One of the changes that the online trading market is in the process of
instigating is longer trading hours.  Traditionally, floor-based trading occurred
between the hours of 9 a.m. and 4 p.m., however, online markets are changing
