9 replies to this topic

[thefirstimmortal]

It’s about 9:00 Monday morning, and I awake without the sounds of an alarm clock. I couldn't be happier because is the beginning of another trading week. I roll out of bed, “commute“ into the next room, and turn on my computer. The work week has begun.
But this is not your typical 9-to-5 job. There is no office to go to, no car pool, and no “good mornings” to co-workers. There is no boss in the next room. I don’t produce a product, nor do I sell one. When people ask me what I do for a living, I pause. In fact, I don’t really “do” anything. There are no clients, no projects, and no dead-lines. There are no co-workers, and no staff. I am known by account number only. I am in total isolation. The entire day I may not see or speak to another soul. The work is extremely intense. The pace is fast. In many regards, this is warfare. It is a job unlike any other in the world.

Sometimes I do feel guilty because I am young and I answer to no one. My day is spent in the comfort of my own home. People may criticize what I do, but on a good day I can make more money in a single afternoon than most of them may make in three months, without ever leaving the house. Still, I am not providing a service to anyone. Is the world a better place because of what! do? Sometimes I don't think so. Very few people understand. They think I'm gambling I tell them it's not.

I am day trading. My job is to buy and sell stocks. I do not work on Wall Street. My seat is not on the floor on the New York Stock Exchange, it is in cyberspace. This is rarefied air These are untested waters. I am among a new breed of entrepreneur and this is a new frontier.

It is now 9:30. The bell has rung and the stock market is open. I take my seat at the table with the world’s biggest banks, brokerage firms, and mutual funds. The chess match has begun.

[thefirstimmortal]

The explosive growth and low cost of online trading has created a new class of investors who can make a living buying and selling stocks over the Internet in a way once reserved for Wall Street’s most powerful brokerage firms and investment banks.

[thefirstimmortal]

Wall Street can be a dangerous place if you are not careful. There are sharks in these waters. They are the best traders in the world. They control the market, they set the odds, and they don’t like day traders. The sharks make their living by trading against you, and you make your living by trading against them. The only problem is that the odds are on their side. This is how it has always been. They are better equipped, faster, and more knowledgeable. And they certainly don’t like to give their money away, especially not to you. It is a fact that the system is geared toward your failure. Wall Street earns its money at the expense of the investing public. You have to recognize this. Many factors come into play to stack the odds of quick success against you. The system is not perfect, though. Through knowledge and experience, you can overcome the odds. Eventually, with the right tools and training, you can beat the pros at their own game.

[thefirstimmortal]

The online day trader is after one thing: the quick kill. But the day trader’s job is much different than people think. Day traders are not investors, they are traders. What does this mean? It means that long-term trends and market conditions do not concern them. Reading The Wall Street Journal cover to cover is not their job, nor is studying graphs, charts, and research. None of these things will put food on their tables. Neither will listening to brokers and analysts, nor knowing every fact, rumor and tidbit about the market. In fact, day traders may not even know anything about the stocks they trade. They may not even know the names or lines of business of the companies- because they don ‘t have to. In this game, knowing too much will not help you, it will hurt you.

This is the short term, and the only thing day traders should be concerned about is the next five minutes. Yet, they know exactly what they are doing. Every trade they make is a precise, well-calculated move. The goal: to get in, to make a profit, and to get out, as quickly and as safely as possible. Welcome to the world of the day trader

[thefirstimmortal]

Do you want to get your head handed to you on a platter? Do you want to get your eyes ripped right out of your skull? Unfortunately that is the inevitable fate of too many first time traders. Why? Because they make the classic mistake of thinking day trading is that easy. It is not. The market is like a wild beast. Sometimes the beast is asleep, and sometimes it is awake. Regardless, you must have a respect for its power because the beast doesn’t care about you, your money or your livelihood. Yet the only way to make a living buying and selling stocks is to fight this beast, head to head, nose to nose. If you want to be a day trader that is what you must do. But everything you have ever learned about investing won’t help you now. The short term is an entirely different world, on a different planet, with different rules. The people who excel here are a rare breed, and the way they make their money may surprise you. Second to second, minute to minute, this is a battle. And when there is a battle, there are casualties. Who will prevail? The one who is best prepared; the one who knows the risks, the one who knows when to fight and when to run.

[thefirstimmortal]

The market will humble those who do not respect it's power.

[thefirstimmortal]

If there is one thing you must have as a day trader, it is respect for the power of the market. You should never attempt to outsmart the market, because in the end the market always wins. What does it mean to outsmart the market? It means believing you are right and the rest of the investing world is wrong. This arrogance is very dangerous. The market is a reflection of the collective wisdom of the investing public. A bad stock is usually cheap for a reason. And a good stock is expensive for the opposite reason. Day traders have no business disagreeing with the market. If they are not humble, the market will humble them.

So, if day traders are not outsmarting the market, how can they buy a stock and sell it seconds later for a profit? It is because, in the short term, the market is inefficient. Day traders are not looking to disagree with the stock prices the market sets. They are not in the business of advising others as to the merits of a particular investment. They are merely temporarily stepping in, when conditions warrant, to fill the short-term gap between supply and demand. It’s that simple. Day traders are middlemen, and nothing more.

[thefirstimmortal]

On the New York Stock Exchange, if a customer (or day trader) is willing to buy stock at the same price as the specialist, and stock trades at that price, the customer is entitled to the stock over the specialist. While the day trader may step in front of the specialist, under no circumstances can the specialist jump in front of, or front-run, the day trader. Exploiting this rule is the day trader’s key to making consistent short-term profits.

This is an extremely important concept to grasp. Perhaps an analogy would shed some light on this. Think of the largest used car dealership you know of. How do they make their profits? By buying cars from the general public at low prices and reselling to the general public at higher prices. The owner of the dealership profits from the spread between where the cars are bought and where they are sold. The general public, unfortunately, is at the mercy of this spread. The owner of the dealership is entitled to the profit because of the risk he or she takes. The dealer might not be able to resell a car after taking it into inventory. In addition, there is overhead and salaries to pay. The profit the dealer makes on the spread is his or her livelihood.

How do you think the owner of the used car dealership would feel if you went into the office and demanded to buy and sell the same cars at the same price as the dealer? Even worse, if you demanded first dibs on any car that came to the dealership to be sold? Suppose the dealer was prepared to bid $5,000 for a used car, and you were too. And you said that, because you were a customer, you were entitled to the car over the dealer if you were both bidding the same price.

[thefirstimmortal]

The reality of online trading is simple: the second day traders enter a trade over the Internet, they enter a dangerous playing field where they are outgunned, outmatched, and outclassed by the faster players in the market. To survive, they must be risk averse, cautious, and alert. And they must never forget one simple fact: when you have a slow execution, volatility is not your friend, it is your enemy.

Smart day traders will do all they can to eliminate this inherent disadvantage caused by the Internet’s slow execution. Their livelihood depends on it. How can they achieve this? Sometimes by leaving the glamor stocks to someone else, and sticking with boring low-volatility stocks instead. Others can have Yahoo!, Dell, and Compaq: The intelligent day trader will realize that these stocks are not the only game in town. Remember day traders do not need movement to make money Nor do they need to take on a high degree of risk to turn a profit.

So what is the key? The answer lies in 1/4s. The trade for the teenie in a slow-moving stock, if done correctly is probably the safest on the face of the earth. Why pick slow-moving stocks? Because 99 percent of the trading world doesn’t bother with them. These stocks tend to fall through the cracks because they are not hot, exciting, or sexy.

[thefirstimmortal]

Remember, when you're day trading, you are not in it for the long term. You are not an investor, It is not your job to guess which of 16 stocks will be higher next week, next month, or next year. It is not your job to know the name of the CEO of a particular company issuing stock, what the company does, or what its earnings expectations are. Nor do you care about price-to-earnings ratios or growth prospects. You care about only one thing: the next five minutes. You want to pick a stock, get in, make your money, and get out. The faster you do this, the better.