the netstocks (EBAY), and other sectors as you wish.
« Here's a new one for Level 2 players: make sure yourstock has one of the “four horsemen" as an ax (MSCOMLCO SBSH GSCO) vs archips “chippies" ARCA INCA thatmove the stock. Leam to follow these axes in and out oftrades.
« See this page for how to choose stocks for swing trading (2days to several weeks); including chart patterns.
« My Favorite Daytrading Stocks for Year 2002: (SOX):AMAT BRCM NVDA GNSS MXIM NVLS QLGC XLNX(GSO): CHKP SEBL VRSN VRTS (NBI) AMGN HGSI GENZMLNM ; others: EBAY BRCD EMLX
Examples:Tlike bigeasyinvestor.com (free software) for screening as well as the one atwww financialweb.com. The best scanner out. there is Tomy Oz' Scannerfor Realtick.for Realtick.Here's a page on the subject from the registered "Daytrading StocksSuccessfull
  
 
 
 
 
+ MOST IMPORTANTLY: Look forstocks who have a good imradaypleas aie mole nce tee
 
 
 
 
 
 
 
 
 
 
 
 
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ading Trainir
 Module Essential Skills fox All Dayraders to Leamm:; 9“ #PREMOUS NEXT
Avoiding the "7 deadiy sins of daytrading": how to wn 1
Stay in the game® Main Points:
The FIRST goal you need to have in daytrading is "How Cani Piay Without Losing My Capitai?".
The Second goai is “How do i make Profitabie Trades basedon things | Now Know to Look for?"
The Third Goai is “How Can i Make Consistent Profits byDaytrading Stocks?"
Without mastering the protective lass-avoidance techniques andhigh-percentage trading pattern skills, daytrading resemblesgambling and over time will consume your capital trade by tradeuntil you're out of the game. This is what happens to the majorityof people who attempt daytrading without educating themselves
, or getting training.
Do you golf? Remember how important it is to avoid getting badswing habits early in your career? Let's try to avoid topping theball and slicing when it comes to trading:
Below are 'Seven Deadly Sins of Daytracling' that you shouldadd to your mental checklist before entering a trade. Thesehelp you with the first goal, preserving your capital:
The “? Deadly Sins of Daytrading':
#1: DON'T TRADE THE MOST ACTIVES: we mentioned this inthe page on choosing stocks to trade. The most actives alsohave the best traders competing on them, and volatility is oftenlower. Your %ages are much better on stocks one level back, insimilar sectors (e.g. don't trade INTC, trade ALTR or XLNXinstead. Don't trade YHOO, trade DCLK.)
#2: DON'T TRADE DURING LUNCH “DEADZONE"™ HOURS:many losing trades occur between 11:30 and 2:30 EST. Thebest time to trade is during the first 2 hours of the market. We'llcover more in our pages on timing entries and exits. Volume islower during lunch hours and the market makers will not buy asmuch stock in this time window. More games and fades.Shorting, however, is usually fine around 11:30-1pm (in general)for stocks that are making lower highs and lower lows. Marketmakers often bid the price down to shake out weak traders overlunch and buy it back in the aftemoon, makiong for eod shortcover rallies.
#3: DON'T RATIONALIZE LOSING TRADES: the ONLYREASON you buy a stock is because you think (or see) thatOTHER TRADERS ARE ALSO BUYING THAT STOCK AT THATMOMENT. If you're wrong and there’s more selling than buying,get out fast. Just do it. The market honestly doesn't care aboutthe stocks fundamentals, earnings, ratings etc. during the next20 minutes that you're in that particular trade. If you're wrong,wisely admit the smaii defeat and take a smaii stop loss.
#4: DON'T CONFUSE DAYTRADING WITH INVESTING: this isone of the biggest hurdles for new daytraders to overcome. Ifyour trading style is, like mine, in for anywhere from a fewminutes to a couple of hours tops, you do not care about all the"noise" such as analysts ratings, the 30day moving average,2month support and resistance levels...you play on momentumonly. Are more people buying the stock now, and for the next fewminutes or half-hour or so? That's what counts in daytrading."INVESTMENTS ARE DAYTRADES GONE BAD". Don't hold dogstocks that went against you and you're holding on hoping for aturnaround someday. That's how to lose money. If you're waydown and the stock has stabilized and isn't selling, then maybehold them. Don't get into that predictament in the first place.
#5: DON'T FiGHT THE TREND. What an insightful statement. :pDaytrading successfully means to understand and capitalize onthe trading trend with 4 times more focus andconcentration than you currently use. Make sure to learnhow to "read the tape", if you don't already have level 2 timeand saies then at least look at the java isiand book viewer(updated realtime during market hours!) for your stock to get apartial picture of what's going on in a given day. The datekstreamer is a similar device, not complete but ok if you're juststarting in daytrading. One of the keys for my ‘turning the corner"was to focus on just a few stocks | know like the back of myhand and follow them with intense concentration. | know themarket makers, gaps, intraday trading ranges etc. and makemoney 80% of the time | trade these (SPLS DCLK NOVL mycurrent favorites).
#6: AVOID LOW-VOLUME "PUMP & DUMP" $1-$10CHATROOM SPECIALS. | wince every time | log into one of thefree stock chat rooms and see people ("sheeple") followingstupid stock calls on junk cheap stocks. | feel sorry for all thetrading losses | witness. To learn to be a pro, play like a pro.Read the books, check out some of the good resources outthere, and IGNORE THE JUNK FREE STOCK CHAT ROOMS. |won't name any names, but there's plenty I'd avoid. They're goodfor companionship and fun, but dont follow the crowd. Overall, I'drecommend the pay chat rooms for learning how to trade vs.playing the stocks that are called. There's a couple of good onesout there, but again, | can usually out-trade the 'room gurus’ sothey're a waste of resources for me, and a distraction.#7: FAiLING TO LEARN FROM ONE'S MISTAKES. Askyourself questions such as: "What did the market teach metoday?", "Where did | trade well, and why?" "Why did | lose onthat last trade, and how could | have made the loss smaller?”“How can | build more consistent trading habits that will help meprofit?" Use a_Daily Trading Journal to help you figure out whatyou're doing right and what needs work.
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Successful Online Daytrading Training ResourcesModule = Essential Skills fog All Dayiraders to Leagm; “PREVIOUS NET
The difference between daytrading and investing: stock yee ;research tips for daytraders@ Moin Points:
You can easily lose money daytrading the highest-rated
growth stocks in the market (ex's: QCOM JDSU ADBE Y
MSFT etc). Daytraciing requires us to use a much finer
“magnifying glass" than investors and analysts use. ay
Just because a stock has a ton of volume, has a great
120-day MA or uptrend, and is frequently talked about in the
media does not mean it's the best stock for daytrading. Be asure to review the stock-choosing tips page to see if your
stocks meet the criteria.
Mentally, this is a difficult concept to translate into practiceas an intraday stock trader. which we are. According toGary K., one of my students, "most of the time | feel like I'mlooking for a needle in a haystack".
This is often the case, and it can be frustrating if you do notdevelop a lot of patience, much like a hunter or pool playerdoes. Rushing and firing away trades without knowing whatyou're doing leads to trading losses. It's ok to buy a low-rated stock (eg all “hold” ratings") if it's going up nicely onhigher-than-average volume. It's bad to buy a high-ratedstock (eg 7 "strong buy" ratings) if it's ina downtrend onaverage volume. {For analysts ratings click here; changethe ticker in the location bar of your browser vs in the page
itself (faster))
If you are saying to yourself "Il don't know, it might go up, letme buy some", you are making a trading mistake. Onlywhen you can say “this is a high-percentage play, I'd besurprised if it doesn't go up from here" should you putthousands of dollars of money into the stock. On the otherhand, you can't wait for “all the planets to line up" or you'llbe in the trade too late and buy the obvious, at which pointsellers will come in and you'll lose as well. It takes balance
and speed.Examples:
WHICH OF THESE TWO STOCES is better to buy as a daytrade this verymoment, based on the buy‘sell pattern alone? (we'll look atRSIMA/Stochs/ Volume in other lessons)
STOCK
#1:Number of brokers Average Recommendation
recommending as: {strong buy) 1.00 - 5.60 (strong sell)Strong Buy ZaModerate Buy a7 This Week 1.44Hold 10 Last Week 1.50Moderate Sell 10 Change 0.06Strong Sell 10STOCK #2:Number of brokers Average Recommendationftecommending as: {strong buy) 1.00 - 5.00 {strong sell)Strong Buy 1Moderate Buy me This Week 2.30Hold mes Last Week 241Moderate Sell io Change O11Strong Sell lo
(scroll to bottom of page for answer)
@ = Answer:
For a DAYTRADE, Buy stock #2: Higher highs and higher lows(an ascending triangie, the stock went on up an additional 1 1/2points from 25 to 27+ that day!). The analysts ratings areirreievant to daytraders, except for an intradayupgrade/downgrade that couid influence the momentum (or agap play on the following day). This is difficult for most people tofully adopt into their daytrading.
For an INVESTMENT, Buy stock #1: If you want to buy and hold for 6months or 2 years or something, well first of all you're in the wrongsite lol. Analysts ratings mean nothing to us except to the degree thatthey influence trading for new upgrades/downgrades, and perhapsoverall trend direction. We care about momentum, not ratings.
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Successful Online Baytrading Training ResourcesModule = Essential Skills for All Dayiraclers to Leann; PREMOUS NEXT
Basic Technicai Anaiysis for Daytrading (page 1) wats )
@ Main Points:
« Most of us who daytrade for a iiving use both Levei 2 and 1-minute tick charts that have a number of indicators we rely on.After awhile, these will become like “second nature" to you(much iike the dashboard is whiie driving a car).
« You need to develop the skill to quickly respond to relevant technicalindicators while avoiding too much complexity that detracts fromyour trading skill and speed.
« As you can see from my setup; I find that it's useful to have alevel 2 window, a one-day interval chart and a 5-day chart alltogether for each of the 9 stocks I am watching at any givenpoint in time.
« In this and other pages we will give you many handy tips fordaytrading technical analysis not found in the books, but essentialfor success. The books generally aren't reaHlife or practical enough;we want to provide specific technical patterns and indicators thatwork for daytrading today's stocks.
« You need to experiment to develop a setup that works well for you:many traders like to just watch 1 to 3 level 2 screens at a time. If itworks, use it! Experimentation is the key.
click for full 4-screensnap
 
Basic Technical Analysis for Daytraders
« Note: | will not waste your time with kindergarten TA you can get inany book; we will instead give you practical methods and ideas.The stuff they don't tell you.
¢ It is useful to keep an eye on 2 simultaneous charts for everystock you trade: The First is what i caii a “cioseup" intraday chart,with a short time interval (1 to 5 minutes). The Second is a 5-day or10-day chart to help you identify current support and resistance levels,and to see "where the stock is coming from" (the time interval for arnultiday chart should be 13 minutes).
* Trading with only today's intraday chart is not enough, you need tosee at least the previous days' openfhighfow/close and volume tounderstand buying/selling behavior for the current day. Especially usefulfor playing opening gaps.
The first TA decision you must make fs:
How often shouid you set your intraday charts to sampie data for?Some traders like 3min/13min setups. others use 5/15 etc.. | like 1/13myself.
e For those of us who scalp and trade in intervals of a few minutesto an hour or two, set your intraday chart data interval to a oneminute close-ine chart.
« For those who trade ionger time intervals (many hours, overnightholds, swing traders}, you may want to use 3-minute charts insteadto fiiter out the minute-by-minute ‘noise.
For this intraday chart, should you use a close-ine, bar or candlestickchart? | use a close-line 1 minute intraday chart and a 5-day candlestick orbar char. Here's what three intraday AMZN charts would look like with eachof these displays:
Close line 1- Candle 1-min: Bar 1-min:
min:
Which is easiest to read? | like the close-line myself, although you don't see theminute-by-minute range. With level 2, you don't need to see that on the chart,since you can "read the tape" and you know what action is going on at each pricelevel. The close-line chart lets me see key support/resistance and trend data.
     
So, have you set up your 1-minute intraday charts for your 3-5 coredaytrading stocks yet? Remember, you should have two charts for each stock.If you don't have a data feed, at least use a bigcharts.com 5- or 10-day chart inaddition to the intraday 1-minute chart you use to trade from.
If (and only if) the stock is giving me uncertain signals and | can't see what's goingto happen from the level 2 patterns, then | will use my "microscope" intraday TAmomentum chart with a few more bells and whistles.Most of us who are daytraders don't use bollinger bands and other TA that's
designed for rnulti-week or multi-mmonth investing. We are daytraders. We may use
stochastics and oscillators, volume breakouts and tape patterns. That's all we
need. Here's an example:1-minute Ciose Line Chartwith:
« 50 MA (red line maingraph)
« Volume (of course)
« RSI (12)
« Slow stochastic (18)
| will not bore you with thedetails of "how to set up yourindicators" other than theseexamples I'm providing; thereare plenty of resources outthere to help you with TA.See next page
How to Use the Indicators:Typically, | rely on supportand resistance levels pluspattems I've memorized tohelp me enter and exittrades. We'll look at patternson the next page. Stochs area daytrader's favorite, likeMACD lines they cross,giving buy/sell signals. RSIfor oversold/overboughtconditions. Use with caution,market direction and tapeflow in time and sales aremost important.
Here's an example of a DCLK 5-day chart (minus one day forThanksgiving; I'll change the chartnext week). Notice that | like touse candiestick 13-minutecharts for 5-day or 10-daycharts. On the chart itself | like toinclude a 50MA (experiment,anywhere fram 28- to 50- MA isdecent) as a trend/support line.Notice that the red/green barsshow buyers/sellers during each13-minute interval. This is usedfor support/resistance spotting.Another nice feature from eSignalcharts.
 
Intraday Support and Resistance Levels
« Hint: start with a 5-day chart to identify the past 5 trading days’ support andresistance, also paying attention to volume and spotting larger pattems(cup and saucer, triangles, pennants. flags, breakouts frorn a trading rangeetc). Volume breakouts are great to trade, as are bottom bounces offsupport levels. Here's an example of a multiday “double bottom" XRX chartshowing support at 28ish:
§-day XRX chart thru 17/26 showing      
support at 28; | drew the yellow
line at 28, asupport level forXRX. How to tradeit? Buy it at around28 to 28 1/4, using27 15/16 as a stop.
If we're right. XRXshould run up for ahalf point or more.If we're wrong,we're out with avery small loss.
It works. (having
said that. now
watch XRX
plumment to 79 on
Mon lol)3-day COMS chart showing doubletop resistance:cows] |Here's a multiday "double top",showing temporary resistance.Do not buy this stock until itbreaks through the resistancelevel on decent volume.
Double and triple bottoms &tops make for easy plays; youcan "trade the channel", surfinglong and short between theboundaries, using close stapsfor protection. The double topindicates an "overbought"condition, where sellers will gainmomentum.
Qverbought, ina Trading Range, or Oversold?
Remember to always try and play overbought or oversold canditions (withvolume and market directions as confirming indicators). The only time toplay stock that's in a range is if you're playing market maker and scalpingteenies (another very valid and common way to daytrade).
High-percentage trades are off the tops and bottoms. Look for double-digitswings (eg down 11% on the day with no news) for high-potential tradingopportunities. Here's a couple of examples:Can you ID supportiresistance Can you say “oversold” for this 5-for this Disney 6-month chart? day Disney chart? Predictabletop, time to short it:
 
any _Elfivtervalcher__ I
Here's an example of an oversoldHRL chart. Given ail the good newsthat just came out the same day (andCNBC mention), it was an obviousbuy at the close of the day:
Of course, | posted this in the "stockpicks" page and bought at thebottom, seiling on the opening gapup.
 
Since i don't normally play this stock,ijust played a very conservative 200shares. Stili, $250 on 200 shares of
an overnight hold is an ok profit.11/22/1999 15:51:58 Bought 200 HPL 40 i/2 $-8, 109.9911/24/1999 09:47:45 Sold 200 HPL 41 7/8 $8,364.73
What fund managers iook for: why you should care as adaytrader. These guys have pre-entered buy and sell programsbased on the $PREM, indexes and most importantly the 50- 100- and200-day MA (moving average) lines on stocks they play.
These give you ideal support and resistance levels...look them up on6-month charts, then narrow in to 5-day and intraday charts, watching
for blocks of at least 10K shares going off in time and sales for buy
and sell signals.
QCOM 6-month joccm fai Cher __E IN SA el)
chart: a thing ofbeauty. be
Notice the stocknever loses its50/100/200 MAlines.
Other charts do. lol
Look for when astock price tests,retests andbounces off any ofthese key threelines forinstitutionalbuy/sell signals.
 
Scope down toa5- or 10-day chartto see the latestaction (espvolume), then puton the watchlist forintraday trading.
It's easy. to ta tor -
« Momentum trading includes "jumping on whatever's hot", suchas IPO's, morning gappers (either gainers or losers), and newsplays. We'll look at reading stochs and advanced momentumoscillators in a later module.
« TAis primarily concerned with both momentum oscillators suchas stochastics, which may be helpful, as well as the slope ofthe close line: the steeper the stope the faster the retracementwill be. See our next page for more examples and “how to's”...
« Here was what is in my opinion the “momentum piay ofthe year". I've never seen anything like it. If I'd a just bought1K shares at 28-30 | coulda woulda shoulda make 20 grand inunder an hour. Of course, | didn't jump in (I rarely play stocks |don't know, or IPOs). Triple Doh! And, the chart was easy toplay, gained 30 points over a slow steady hour of trading.poe — a
Gee Marge weshoulda bought someof this at the openDeht
  
 
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 Module = &sseniial Skills for All Dayiraders to Leas; 9“ #*EMOUS NET
Basic and Advanced Technical Analysis for Daytrading (Page113)@ Main Points:
Back toMODULE 1
« Successful daytrading depends on your ability to correctlyinterpret high-probability chart patterns that will provide youwith buy and sell signals.
« Learning technical analysis of stock charts is a critical skill thattakes time and many hours of observation and practice to master. Itis not easy.
« Once you take the time to learn what to look for and how totrade it, you will gain confidence in your trades and veryseldom be ‘surprised’ by price momentum. You will be able tobetter anticipate where to enter stops. how to identify support andresistance, and manage your daily trading activity with morecertainty and profit.
« Some daytraders use only intraday charts, others use only level 2.Our belief is that mastering both sets of skills will give you acompetitive edge against other traders whose capital you aretrying to take. Like windage and elevation scope controls for a high-powered rifle, you want to use the tools to be able to consistently hitthe bullseye for winning trades. It is very much a learned skill.Daytrading is a zero-sum game. Mastering 1-minute intraday chartTA is a very useful skill.
« We wiil give you a synopsis of exactiy what to iook for with themost frequently-used daytrading chart patterns: Volume,Formations (triangies, channels, flags, breakouts etc.},Stochastics, MACD, MA and RSi.
« For this and other modules, we will be developing quizzes and "testyourself'-type trading scenarios to help you further develop yourdaytrading skills.
« Entire books and chapters within trading books have been writtenabout TA, so | will provide examples and recent charts, along withnew information, to help further your understanding of technical chartanalysis.
TA 101: How to Read Intraday Charts
« Overall market trend is king, so always watch Nasdaq($COMPQ), spoos, (/SP9) and sector charts (eg $GIN, $SOX) asthe highest priority.
« Second, look at the 5-day historical chart for your stock to identifyrecent support and resistance levels.
Third, look for the specific 1-minute (or 3-minute) intraday chartpatterns we'll be discussing on this and our other two pages(intraday bull and bear charts) to identify high-percentage patternsto trade.
Finally, look at volume accompanying the patterns you see.Remember, traders "vote with volume", so a trend on low volume(eg during 11:30-1:30EST) is suspect.
BASIC INTRADAY TREND PATTERNS: Up, Down and Sideways
Stocks tend to follow through on their patterns, until volume and pricedirection change. Here's a few examples:
UPTRENDING CHARTS: Notice higher highs and higher lows
wivolume. No serious selling, price gets higher throughout the trading
day.Po
   
 
DOWNTRENDING CHARTS: Notice lower highs and lower lows wivolume. Noserious buying, price gets lower throughout the trading day. The CIEN chartbelow shows it sold off then settled into a consolidation, or TRADING RANGE,from 10:30 to 12:30. Notice 3 volume spikes, even though block buys ofaround 100K shares went off it wasn't enough to lift CIEN's price. A weakstock.
For the COMPQ (NASDAQ Composite) screen. notice the trend lines | drew in,showing the composite index wasn't getting much buying after the morning runup (12/8/99). 
IDENTIFYING SUPPORT AND RESISTANCE is an important skill tolearn, particularly when your'e looking to improve your skill at buyingbuttoms and shorting tops (as well as the basic “buy into the trend”approach). Again, start with a 5- or 10-day look, then narrow your focusinto the current day's trading momentum.
SUPPORT: In the CIEN chart above, support is at 47 1/2. In the GMGC
chart below, where is the support line at? How would you trade it?
   
(answer: the support line is in pink, buy the stock if it breaks through theresistance level 1/4 point above the support line - the resistance level. Buyon a breakout above the resistance, or buy off the support level and sell it atthe top of the trading range - this is a “channel play").
DOUBLE BOTTOM INTRADAY (or 5-Day} SUPPORT BOUNCE: In the XRX5-day chart below, we see that support is at 28. You could either buy thenext time it hits 28 (with a stop at 27 7/8), or wait until it breaks through it'sresistance line at 28 3/4.
DOUBLE TOP INTRADAY (or 5-Day} RESISTANCE SHORT: Can youidentify the "double top" in the chart below? What's the play? Short it at the2nd top, especially if it's reaching the 2nd top on fower volume (or during lunchhours). The price will probably fade. On the other hand, you'd want to go long ifit broke through the resistance level on the 2nd or 3rd try.| cc
 
Advanced Intraday TA: What the Pros Use
On the next two pages, we will go over specific chart patterns to be onthe lookout for: Bullish Intraday Chart Patterns and Bearish IntradayChart Pattems.
Below, we will learn how to daytrade using advanced intradaytechnicai indicators that pro daytraders and mm's use to scalp tradesand better time their entries and exits. The equivalent in Level 2 (whichwe'll cover in Module 2), involves shadowing the lead market maker,identifying t&s mornentum pattems, and managing your bid/ask sizes.
Please study this chart carefully for a few minutes:
JOCK Elites Crt
  
50 WA
RSk: Relative Strength Indes
13 Slow Stochastic
12,26,9 MACDThere are dozens of technical indicators out there (Bollinger bands, envelopechannels etc). The ones on the chart above are the only ones that pros use.We wili cover how to use them to daytrade effectively (although | was a FordMotor Co. statistician & years ago, | will not put you to sleep with the computationaldetails; see a good TA book for that):
50MA Use an MA iine to help you see the average price trend throughoutthe day. Think of it as a dynamic support/resistance line. It plotsthe average price for you. Buy when the price dips to touch the50MA and starts to rebound. In the DCLK example above, look atthe price at 14:30 (2:30pm). A buy signal would be when the pricetouched the 50MA red line and started to rebound. Buy Limit DCLK167 1/4. Sell anywhere over 170.
By the way, the only reason we use charts andlevel2 is for us to be able to correctly respond tothe buy and sell signals they are giving us. It takeslots of practice (months and months) to develop asense for reading the charts and level2. So bepatient with yourself and start practicing.
RSI: Relative Strength Index
RSI is somewhat useful, though not my favorite indicator. RSlis amomentum indicator which measures an equity's price relative toitself. RSI is less responsive to big swings in the price, so it filtersout some of the "noise" in a stock's trading activity. A buy signal isseen when the RSi line drops beiow 20 and starts to touch thebottom line - in the DCLK example above look at the 11:00 RSIcurve - this was RSI's contribution to the day, told us to buy whenRSI kissed the 20 line. A seli signai occurs when the RSI goesabove the 80 line, although I've found many false signals in usingRSI. Therefore, use RSI only as a confirming indicator for theother technical and momentum price signals you see. Also, checkfor divergence between RSi and the price curve; eg if you see adownward sloping price curve and upward sloping RS! curve theprice may rebound up, if you see