What is Day Trading?
Have you heard of day traders? These are people who reap profits from Wall Street day in day out. They do nothing but trade, they answer to no one but themselves. Day trading is their livelihood, their bread and butter. Day trading is profit driven. If you have aims other than making money from the markets, you are probably reading the wrong article. This is not an article for gamblers who seek short term thrills in the markets, nor is it meant to be a theorectical exposition on day trading for academic researchers.
Why day trade? Is it worth the effort? Day trading offers the road to financial freedom. The day trader is independent. He is free from the office routine, not restraint by time or place, he works when and where he fancies. This is the power of day trading!
What does it takes? You don't need to be extremely smart to be successful in day trading. The most successful day traders are those who have the iron-resolve and solid discipline. Intelligence is certainly welcomed, but is not an essential criterion for success. I was never the top in my class and always scrapped through my exams. SO WHAT? I am making big bucks by just trading a few hours per day.
Don't get me wrong, I am not profitable from day one. This article does not offer another get rich fast campaign. It took me almost one year of daily trading to reach where I am now. Constantly revising and researching on various methods finally paid off. It is hard work and you are not going to get any richer just by just reading and not practicing. Can you drive a car just by reading the manual? You have to practice what you learn. I hope you can learn something from this article to jumpstart your trading.
Day Trading VS Investing
There is a distinct difference between day trading and investing. The main difference is the time frame and methodology used. Investing requires a much longer time frame than trading, from months to years to decades. Usually you want to select a good company that will not go bankrupt the next day you purchase it. You will also want to analyze the fundamentals of the companies, make sure it is in good financial health and has a competitive advantage relative to other companies in the industry.
Trading takes a different approach to making money. The time frame considered is short from a few minutes to hours to days, weeks or maybe a month. Specifically, day trading refers to strictly trading within the day. This means that you do not hold positions overnight. For example, if you buy at 10:00 (EST), you have to sell before 16:15(EST) when the market closes.
There are no rules against holding overnight but risk is minimized if trading is strictly restricted to within the day. The market often moves in reaction to news when exchanges are closed. Stocks usually do not have much liquidity and trade on light volume after market hours. Imagine what would happen to your long position when there is a sudden hurricane strike when market is closed. The market will drop but you might not be able to sell at a reasonable price due to low volume. I sleep better at night when I know have no open positions overnight. Whatever losses and winnings are strictly during market hours when there is enough volume to trade. How the market moves after the closing bell does not affect me and I start the next day with a new state of mind.
Tuesday, September 9, 2008
Become a Forex Trader From Home - in Simple Steps and Make Huge Consistent Profits
If you want to become a forex trader from home and earn a lucrative income you can. Here we will outline how to do this in simple steps you can follow and enjoy currency trading success.
Let's start with a sobering fact - 95% of traders lose.
They don't lose because they can't learn currency trading anyone can, it's a learned skill.
They lose because they either get the wrong forex education, or have the wrong mindset and forex is a unique combination of method and mindset.
Let's stress another obvious fact which most traders fail to register and lose.
You cannot get rich by following someone else!
Don't believe all the gurus, mentors and vendors trying to sell you systems which will make you rich, like the ridiculous forex robots you see all claiming profits and all they have is a back tested track record in hindsight.
If forex trading was as easy as the above, everyone would be making money and that's clearly not the case.
There are only around 5% of traders who make big money and there not in most instances, the cleverest or the hardest working - but they know what it takes to succeed and you must too.
So what does it take to succeed?
In the first instance you need a robust, simple, forex trading strategy and the simpler the better.
Don't be fooled by thinking complicated methods are best - there not.
Make a system to complicated and it will have too many elements to break.
You should base your system on forex charts and simply follow high odds patterns - this is easy to learn and you can do it in a few weeks.
Next you must make sure that you understand and have confidence in your forex trading system (this is why you cant follow other peoples) because, if you don't, you will never have the discipline to follow your method.
If you can't follow your system with discipline, you don't actually have a method!
One of the biggest myths about currency trading is you can trade for regular income or trade with no drawdown. This is mostly promoted by vendors telling you it's easy to trade so you buy their products but has no basis in reality.
Any forex trading system (even the best ones) will spend week or months when they lose and you have to have the discipline to stay on course until you hit a home run. This is not easy - but in forex trading you have to lose to win.
Discipline is a major problem for most traders and if you can achieve it, you are on the road to currency trading success.
Here is a simple equation you should keep in mind:
Simple Logical Robust Trading System = Confidence = Discipline to apply = Forex Profits
While the above equation is simple, most traders don't understand it, if you do and base your forex trading strategy on it, you can achieve forex trading success.
Keep in mind, forex trading is not just about having a good system, its about having confidence in it and the discipline to apply it for success which will see you make long term gains and achieve the income you desire.
Let's start with a sobering fact - 95% of traders lose.
They don't lose because they can't learn currency trading anyone can, it's a learned skill.
They lose because they either get the wrong forex education, or have the wrong mindset and forex is a unique combination of method and mindset.
Let's stress another obvious fact which most traders fail to register and lose.
You cannot get rich by following someone else!
Don't believe all the gurus, mentors and vendors trying to sell you systems which will make you rich, like the ridiculous forex robots you see all claiming profits and all they have is a back tested track record in hindsight.
If forex trading was as easy as the above, everyone would be making money and that's clearly not the case.
There are only around 5% of traders who make big money and there not in most instances, the cleverest or the hardest working - but they know what it takes to succeed and you must too.
So what does it take to succeed?
In the first instance you need a robust, simple, forex trading strategy and the simpler the better.
Don't be fooled by thinking complicated methods are best - there not.
Make a system to complicated and it will have too many elements to break.
You should base your system on forex charts and simply follow high odds patterns - this is easy to learn and you can do it in a few weeks.
Next you must make sure that you understand and have confidence in your forex trading system (this is why you cant follow other peoples) because, if you don't, you will never have the discipline to follow your method.
If you can't follow your system with discipline, you don't actually have a method!
One of the biggest myths about currency trading is you can trade for regular income or trade with no drawdown. This is mostly promoted by vendors telling you it's easy to trade so you buy their products but has no basis in reality.
Any forex trading system (even the best ones) will spend week or months when they lose and you have to have the discipline to stay on course until you hit a home run. This is not easy - but in forex trading you have to lose to win.
Discipline is a major problem for most traders and if you can achieve it, you are on the road to currency trading success.
Here is a simple equation you should keep in mind:
Simple Logical Robust Trading System = Confidence = Discipline to apply = Forex Profits
While the above equation is simple, most traders don't understand it, if you do and base your forex trading strategy on it, you can achieve forex trading success.
Keep in mind, forex trading is not just about having a good system, its about having confidence in it and the discipline to apply it for success which will see you make long term gains and achieve the income you desire.
Option Trading - Future Stock Prices
For the experienced investor, stock options trading can be a great way to add some flavor to your portfolio while subtracting out some of the risk of investing in certain stocks. As a short or long term investment, options provide you as an investor a great way to place a bet on the long term health of a company or some other issue trading on the open market in the hopes that you can correctly predict the movement of an issue and profit.
Although option trading can be risky, especially for those traders with little or no experience, the payout can be amazing for those who are able to take the risk. Stock option trading basically consists of purchasing a contract that allows you to buy a block of shares in a certain company at a set rate as long as you do so on or before a certain date. What type of movement you anticipate happening with a particular stock in the market will determine the type of option you purchase.
If you are optimistic regarding a particular enterprise, it is possible to invest in a call option on the option trading market to pick up shares of that firm at a fixed cost at some point down the road. Should the stock's price exceed the option price at that time, you can make your transaction with the contract's seller at what is called the "strike price", making a profit afterwards by selling at the current market rate.
An opportunity in the option trading market is to purchase a put option on a stock, especially during times of uncertainty. In using the put option, an agreement is made between buyer and seller where the buyer will sell back the shares at the strike price of the option when the price of the stock becomes lower than the strike price. When the stock price falls lower than the strike price, it is also possible to purchase the shares at the lower price. The seller of the option must in turn pay the strike price per share to you for the stock. This will allow you to earn a profit.
When it comes to trading options, this simplified explanation of the two basic types of options is just the beginning. Because trading is a complex concept, there are many sources which offer stock option education to those who are inexperienced but wanting to make money with this type of investment. These sources include courses and informational websites. Please be aware that there is a great risk involved with the trading options, and a number of investors can lose money on option trading over time.
Whether you want to diversify your portfolio or play a hunch regarding a certain company's movement in the stock market, you should consider making an investment in option trading. Even someone new to the stock market can break into this exciting field with the amount of educational material that is widely available on this topic. And it certainly offers the potential for quite a large financial gain.
Although option trading can be risky, especially for those traders with little or no experience, the payout can be amazing for those who are able to take the risk. Stock option trading basically consists of purchasing a contract that allows you to buy a block of shares in a certain company at a set rate as long as you do so on or before a certain date. What type of movement you anticipate happening with a particular stock in the market will determine the type of option you purchase.
If you are optimistic regarding a particular enterprise, it is possible to invest in a call option on the option trading market to pick up shares of that firm at a fixed cost at some point down the road. Should the stock's price exceed the option price at that time, you can make your transaction with the contract's seller at what is called the "strike price", making a profit afterwards by selling at the current market rate.
An opportunity in the option trading market is to purchase a put option on a stock, especially during times of uncertainty. In using the put option, an agreement is made between buyer and seller where the buyer will sell back the shares at the strike price of the option when the price of the stock becomes lower than the strike price. When the stock price falls lower than the strike price, it is also possible to purchase the shares at the lower price. The seller of the option must in turn pay the strike price per share to you for the stock. This will allow you to earn a profit.
When it comes to trading options, this simplified explanation of the two basic types of options is just the beginning. Because trading is a complex concept, there are many sources which offer stock option education to those who are inexperienced but wanting to make money with this type of investment. These sources include courses and informational websites. Please be aware that there is a great risk involved with the trading options, and a number of investors can lose money on option trading over time.
Whether you want to diversify your portfolio or play a hunch regarding a certain company's movement in the stock market, you should consider making an investment in option trading. Even someone new to the stock market can break into this exciting field with the amount of educational material that is widely available on this topic. And it certainly offers the potential for quite a large financial gain.
Forex Trading Tip - A simple Tip to Dramatically Increase Your Profits
This trading tip is simple logical and will if you apply it increase your profit potential dramatically. It dates back to the nineteenth century and applies in many areas of life not just forex trading and is known as the 80 - 20 rule. Let's take a look at it in more detail.
The 80 - 20 Rule
Vilfredo Pareto, an Italian philosopher, noted that just a small section of the population held most of the money and power.
He postulated that in most countries, 80% of the money and power was controlled by just 20% of the people. Therefore, 20% of the participants accounted for 80% of the results of the entire nation. The 80 - 20 rule applies to many areas of business where 20% of customers account for 80% of the profits and the 80 - 20 rule also applies to Forex trading and in simple terms, the key factor to consider is this:
20% of your efforts will account for 80% of your profits - so what do you need to do?
Cut your trading frequency - it's a known fact that most traders trade too much, take low odds trades and lose.
How many traders for example engage in day trading? They think that they can get lots of small profits and build long term gains - it doesn't work. There trading so often in such sort time frames that they cant get the odds on their side and lose guaranteed. But its not just day traders that over trade - most traders do.
I know traders who trade less than a dozen times a year, yet make triple digit profits and the reason is -they are focusing on high odds trades only and you should do the same.
Lots of forex traders don't actually want to make money there just there for the thrill and experience - if you want an experience and don't mind losing that's fine - personally I would rather go to the casino!
If you want to make money its time to cut your trading back and only hit the high odds trades doing this also has another advantage:
You can hit them with more money and increase your profit potential.
If you have a high odds trade by its very nature you should risk more as you are not trading so often. You have a higher chance of success and that means risking more money.
Forex trading success is all about getting the odds in your favor and taking calculated risks when you see them - this isn't being rash, this is a sensible way to make forex profits.
If you think about the above and apply the 80 - 20 rule, you should be able to increase your forex profit potential and in some cases it will be dramatic.
The 80 - 20 Rule
Vilfredo Pareto, an Italian philosopher, noted that just a small section of the population held most of the money and power.
He postulated that in most countries, 80% of the money and power was controlled by just 20% of the people. Therefore, 20% of the participants accounted for 80% of the results of the entire nation. The 80 - 20 rule applies to many areas of business where 20% of customers account for 80% of the profits and the 80 - 20 rule also applies to Forex trading and in simple terms, the key factor to consider is this:
20% of your efforts will account for 80% of your profits - so what do you need to do?
Cut your trading frequency - it's a known fact that most traders trade too much, take low odds trades and lose.
How many traders for example engage in day trading? They think that they can get lots of small profits and build long term gains - it doesn't work. There trading so often in such sort time frames that they cant get the odds on their side and lose guaranteed. But its not just day traders that over trade - most traders do.
I know traders who trade less than a dozen times a year, yet make triple digit profits and the reason is -they are focusing on high odds trades only and you should do the same.
Lots of forex traders don't actually want to make money there just there for the thrill and experience - if you want an experience and don't mind losing that's fine - personally I would rather go to the casino!
If you want to make money its time to cut your trading back and only hit the high odds trades doing this also has another advantage:
You can hit them with more money and increase your profit potential.
If you have a high odds trade by its very nature you should risk more as you are not trading so often. You have a higher chance of success and that means risking more money.
Forex trading success is all about getting the odds in your favor and taking calculated risks when you see them - this isn't being rash, this is a sensible way to make forex profits.
If you think about the above and apply the 80 - 20 rule, you should be able to increase your forex profit potential and in some cases it will be dramatic.
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