Getting Up the Learning Curve

In the intro we talked about the investor working hard and saving money to invest. A prudent person would spend a little time and money familiarizing themselves with the various investments available and try to make the best choices possible. Many people do try to do this themselves and feel confident when they click the mouse to make that first trade. These same traders quickly find out that they were horribly wrong. What part of the learning curve did they miss?

The truth is that while many novice investors have read a few books or articles on the stock market, more often than not the equities / stock market is the last place the beginner should put their money. This is especially true when talking about day trading for beginners. The stock market is the realm of highly capitalized, extremely sophisticated investors and institutions. Is that really the place for a small stake player to be learning the ropes? The truth is that stocks are where the most expensive lessons are taught. The first lesson in any day trading for beginners course ought to be that there are many other places to trade and make money, and nearly all of them offer better potential outcomes than equities.

How to Get More Bang for Your Investment (and Education) Buck

Face it, day trading for beginners is a learning experience first. Does that mean a novice should be reading dozens of books on the topic before opening an account and placing trades? Not necessarily but a little research on the internet will expose the beginner to numerous alternative investments which are profitable at lower capital commitment levels – and this is key for novice traders. Getting a greater hands on education in short-term investing means getting as many small trades as possible in order to learn as much as possible without losing too much capital.

First, you need to determine whether the market is ranging or not. For this you can use the Average Directional Index (ADX) Indicator. ADX is used to measure the strength of the trend in the market. Low ADX readings indicate that the market is ranging. As a rule of thumb, when the reading is between 0 and 20, it is an indication of a ranging market.

Now, when the market ranges, it moves between two almost horizontal lines called support and resistance.Support is the zone where the buyers enter the market in large numbers thinking that the price is low enough for them to make an entry into the market. In the same manner, resistance is the price zone where sellers enter the market in large numbers thinking that the price has become too high and this is the best time to take profit.

So, price action will move like a ping pong ball between the support and resistance. You can think of support as the floor of a room. When you hit the floor with a ball, it will bounce up towards you. In the same manner, think of the resistance as the ceiling of a room. When you will hit it with a ball, the ball will bounce down and return to you.

This back and forth movement of the price action will continue as long as the market is ranging. Now, almost something like 70% of the time, the market ranges. In range trading, you enter the market when the price action hits the area of support and exit when the price action hits the resistance. You keep on doing it as long as the market ranges. Now, your profit will depend on the width of the range. Width is the number of pips between the support and resistance lines. If the width is too narrow something like 10-15 pips, it is an indication of a very tight range that might not be worthwhile the effort to trade.

But if the width of the range is like 20-40 pips, you can do range trading and make 20-40 pips each time you enter and exit the market. So, you will have to learn range trading as most of the time, you will find the market ranging!

To learn how to do this you are going to want to take a few courses online, or read some literature on trading, just so you can make sure that you know what you are doing. There are many different resources that you can take advantage of, and some of them are even going to be free. You just need to take the time to read them.

There are many free ebooks online that you can read that will teach you how to begin forex day trading, and there are also many different websites that perform this service that you can practice trade on, and they will have tutorials as well. Although there is going to be a lot of money to be made, you aren’t going to want to make large investments in the beginning when you first start learning.

It may take you a while to get the hang of things, so don’t risk losing a lot of money. As time goes on you are going to find that you are a lot more comfortable with what you are doing, and then you can make larger investments and trades. There are a few different sites where you can monitor the market, and they are also going to be cheap to trade on as well.

Read the different reviews on the internet to see what people have to say about the different broker sites to find out which one has the best reviews. You will need to either create a bank account or link one of your bank accounts to the site so that you have the funds to start trading. Set aside a specific amount of money that you want to use when you are first learning.

Forex day trading is a great way for you to work from home, and make a great living if you can get the hang of it. Take advantage of all of the different teaching programs and tutorials that are readily available, and start out with small investments. The more comfortable you get, the more money you will invest, and the more income you will make.

First of all, a beginner must only focus on one or two day trading techniques. Even though there are countless ways with which you can approach trading situations, it is best that you stick with just one or two first if you’re a beginner. One key to becoming a successful day trader is not to master all day trading techniques. A successful trader is a master of only a few techniques and if you’re still a beginner, start with just one or two.

Another tip that expert day traders will give you is to control your emotions. Some day traders tend to act on their emotions during day trading, causing them to become impulsive with their decisions. Even though impulsivity can be good sometimes, it usually turns out for the worst because it lacks careful thought and evaluation. In every situation, it is important that you be able to control emotions and analyze it so that you can come up with a good judgment.

Even during the early stages of a person’;s career, you must be able to develop skills at managing money. A day trader will not be successful if he or she doesn’t make a good money manager early on. With each trading day, risk no more than 2% of your position so that if ever you suffer from losses, you still have enough money to regain losses for the next couple of days.

Beginners tend to sulk over losses but expert day traders get over it easily. In fact, it motivates them to do better next time. And so, another tip for beginner is to get over shortfalls as quickly as possible. Instead of crying over spilled milk, rethink your strategies and see if you did anything wrong. Learn from your mistakes as quickly as possible and get back on your feet as soon as possible. That way, you can recover from losses in the shortest time.

This is not an easy process and it takes a great deal of work to succeed at this. This work entails performing a great deal of research across the entire stock market spectrum. This is a critical point because day trading decisions should rarely be based on looking at a small fraction of the market.

Stock trading involves picking a stock that is currently at a low price per share and then selling it when it increases in value. The time frame for this strategy is essentially completely open. That is, you can purchase the stock and hold it for a few years before selling it. However, with day trading, you would perform your sales in a much more rapid manner. In some instances, you would buy and sell the stock in the same day.

If you invest a great deal of money and earn a small profit on it, the profit will be quantified by the high amount of the initial investment. For example, investing $10,000 in a stock in the morning and selling at the close of the day for $10,300 is a nice profit for one day’s work: $300. Of course, the possibility to earn more is there but so is the potential to lose a great deal of money. Again, day trading is a complex and difficult process. That is why a clear understanding of what it is one is investing in is critical.

This is why it is important to have access to an excellent stock picking software or platform that can help deliver expansive statistics on the market. From this information, one can make a much more well informed decision. This, in turn, will add to the potential to succeed with your trades. Clearly, if you want to engage in day trading for a living you will need to make profits on the bulk of your trades. You simply would not be able to do this for a living if you were losing money on the bulk of your trades. Once again, this is why it is necessary to have a solid software program that can help you make better informed and, hopefully, more successful trades.

A Stock Assault 2.0 would be one of the better programs to work with. Such a program will launch an expansive technical analysis of the market and present that information. No, it does not make prediction or pretend to be a virtual stock market guru. Instead, it is a logical device designed to help promote successful day trading decisions. While this may seem like a simple goal on the surface, it is the primary means in which many day traders are able to be successful in their venture.

Trading costs are the problem. When you enter a trade, there are two key elements to the cost. One is the brokerage fee, and the second is slippage (the loss you experience when you are filled at a worse price than you had hoped for – not a factor if you’re trading method enters with limit orders). Whether you target a large or small profit, your trading cost is fixed.

A day trader inevitably targets smaller moves than a longer term trader. Therefore, trading costs are going to consume a greater percentage of the profit. For example, assume you are trading a futures market where your average trading cost is half a point. A day trader aiming at a four point profit for a trade will lose 12.5% in trading costs. A long-term trader targeting a 50 point profit will lose only one percent in trading costs.

When you design day trading systems, you will often find a method appears to yield an excellent return until you factor in the likely trading costs. When you do so, the apparent positive expectancy often turns negative.

Offsetting this disadvantage are three significant advantages:

A day trader tends to be in the market for very short periods of time. (For example, using one of my own favourite methods my average trading time is less than 10 min per day.) This vastly reduces the risk from unexpected events which seriously disrupt the market. Such events happen more often than you may think, and can be very expensive.

As a simple real-life example, the soy beans (November 2010) futures contract touched 1070 during the last hour of trading on 7 October 2010. It would not have been unreasonable to go short at 1070, with, say, a stop loss set at 1075. A day trader would have been well pleased because the price at the close, when the day trader would exit the position, was 1070 – a five point profit on the short trade.

The longer term trader would no doubt be looking forward to the open on the following day (a Friday morning), but prior to the open the government released a surprising report showing that corn supplies were much lower than had been anticipated. This had a flow on effect in the beans market causing it to open limit up at 1135 (normally the price of a beans futures contract is not permitted to move more than 70 points from the previous close in any one trading session). As there were no buyers at 1135, there were no trades that day. Therefore, the stop loss order at 1075 was not triggered.

The long-term trader has gone from an open profit of five points on the Thursday night to an open loss of 65 points on Friday night and faces a long, worrying weekend. On the following Monday, the exchange expanded the limit by 50% permitting moves of up to 105 points. The trader watched the open with trepidation, knowing that it is not uncommon for limit moves to continue for several days… Fortunately, in this case, the market did not open limit up again, but it did rise a long way to 1176.5. As there were trades at this level, the stop loss order would be triggered, crystallising a loss of 106.5 points.

Whether the trader would survive this trade depends on his or her capitalisation and the degree of risk they took when entering the trade. The trader had anticipated a five-point risk in the trade, but eventually experienced a loss more than 21 times as large as this. If that five point risk had represented 5% of available capital, this trade would have been ruinous. If the five-point risk represented 1% of available capital, this trade would have been very unpleasant, but the trader may still have been in the game…

The risk of unexpected events causing market price to gap through stop loss orders is much greater when you are in the market overnight, over weekends and during public holidays. To my mind, the greatest single benefit of being a day trader is that you are largely protected from such events and get to sleep soundly at nights.

To learn how to do this you are going to want to take a few courses online, or read some literature on trading, just so you can make sure that you know what you are doing. There are many different resources that you can take advantage of, and some of them are even going to be free. You just need to take the time to read them.

There are many free ebooks online that you can read that will teach you how to begin forex day trading, and there are also many different websites that perform this service that you can practice trade on, and they will have tutorials as well. Although there is going to be a lot of money to be made, you aren’t going to want to make large investments in the beginning when you first start learning.

It may take you a while to get the hang of things, so don’t risk losing a lot of money. As time goes on you are going to find that you are a lot more comfortable with what you are doing, and then you can make larger investments and trades. There are a few different sites where you can monitor the market, and they are also going to be cheap to trade on as well.

Read the different reviews on the internet to see what people have to say about the different broker sites to find out which one has the best reviews. You will need to either create a bank account or link one of your bank accounts to the site so that you have the funds to start trading. Set aside a specific amount of money that you want to use when you are first learning.

First, you need to determine whether the market is ranging or not. For this you can use the Average Directional Index (ADX) Indicator. ADX is used to measure the strength of the trend in the market. Low ADX readings indicate that the market is ranging. As a rule of thumb, when the reading is between 0 and 20, it is an indication of a ranging market.

Now, when the market ranges, it moves between two almost horizontal lines called support and resistance.Support is the zone where the buyers enter the market in large numbers thinking that the price is low enough for them to make an entry into the market. In the same manner, resistance is the price zone where sellers enter the market in large numbers thinking that the price has become too high and this is the best time to take profit.

So, price action will move like a ping pong ball between the support and resistance. You can think of support as the floor of a room. When you hit the floor with a ball, it will bounce up towards you. In the same manner, think of the resistance as the ceiling of a room. When you will hit it with a ball, the ball will bounce down and return to you.

This back and forth movement of the price action will continue as long as the market is ranging. Now, almost something like 70% of the time, the market ranges. In range trading, you enter the market when the price action hits the area of support and exit when the price action hits the resistance. You keep on doing it as long as the market ranges. Now, your profit will depend on the width of the range. Width is the number of pips between the support and resistance lines. If the width is too narrow something like 10-15 pips, it is an indication of a very tight range that might not be worthwhile the effort to trade.

But if the width of the range is like 20-40 pips, you can do range trading and make 20-40 pips each time you enter and exit the market. So, you will have to learn range trading as most of the time, you will find the market ranging!

Wherever you decide to purchase your day trading computer systems from, it is important that that entity offers fully customized computers for trading. Then these custom trading computers should have the best components on the market, which includes processors with multiple cores and threads. With these, you will be able to run your applications and programs seamlessly together. No worrying about system crashes and latency due to lack of power.

Speaking of crashes, you’ll also need a customized trading computer that comes with cooling fans. This will ensure that your PC doesn’t overheat while running all of your programs. There are different types of cooling systems and fans to choose from. It is important to have one that is close to your processor and graphics card, since these are the areas that conjure up a lot of heat during usage.

With a fully customized trading computer, you can conduct your trading tasks with ease. It can’t guarantee that you will become rich off the stock market, but it can ensure that you can see all of the stocks in real time. Making quick decisions is very important in this line of work. Any delays can and will prevent you from being able to buy and/or sell a stock when needed. You could end up missing out on real opportunities because of a slow computer.

Other than having a stellar processor, you will need lots of memory RAM and hard drive space. You should go with at least a terabyte of space, so that you won’t have to worry about filling up the disk space too quickly. Having a hard drive with fast rpm will also ensure that you can get access to your data quickly. A high definition graphics card will enable you to view your data crisply on the multiple monitors that you’re going to need.

Getting Up the Learning Curve

In the intro we talked about the investor working hard and saving money to invest. A prudent person would spend a little time and money familiarizing themselves with the various investments available and try to make the best choices possible. Many people do try to do this themselves and feel confident when they click the mouse to make that first trade. These same traders quickly find out that they were horribly wrong. What part of the learning curve did they miss?

The truth is that while many novice investors have read a few books or articles on the stock market, more often than not the equities / stock market is the last place the beginner should put their money. This is especially true when talking about day trading for beginners. The stock market is the realm of highly capitalized, extremely sophisticated investors and institutions. Is that really the place for a small stake player to be learning the ropes? The truth is that stocks are where the most expensive lessons are taught. The first lesson in any day trading for beginners course ought to be that there are many other places to trade and make money, and nearly all of them offer better potential outcomes than equities.

How to Get More Bang for Your Investment (and Education) Buck

Face it, day trading for beginners is a learning experience first. Does that mean a novice should be reading dozens of books on the topic before opening an account and placing trades? Not necessarily but a little research on the internet will expose the beginner to numerous alternative investments which are profitable at lower capital commitment levels – and this is key for novice traders. Getting a greater hands on education in short-term investing means getting as many small trades as possible in order to learn as much as possible without losing too much capital.