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A Perspective on Day Trading

Observations, Claims, and Caveats

Beware that you do not lose the substance by grasping at the shadow.

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Now more than ever, day trading is both a viable as well as a potentially profitable venture that is open and available to all traders. While day trading was once the fiercely guarded and virtually exclusive domain of the professional trader, significant advances in the speed of communications and in computer technology have made it possible for the average trader to participate in and to win at what I consider to be "the fastest game in town." No longer does the floor trader have exclusive rights to the spoils of day trading. Virtually any trader, armed with knowledge, a trading system or method, and sufficient starting capital can compete effectively in this high stakes game.

However, the possibility of profitable day trading is nothing more than an unattainable dream if the rules and procedures of the game are not properly understood, learned, and applied. It is the rare individual indeed who is capable of achieving the discipline and persistence that are among the prerequisites for success as a day trader.

In order to achieve this end, the following inputs and ingredients must be present (not necessarily in order of importance):

ж Knowledge of trading terms, methods, systems, and indicators

ж Sufficient starting capital, all of which must be risk capital

ж One or more viable, tested, effective, and operational trading systems, methods, and/or indicators

ж The time, patience, and persistence to effectively and consistently implement the indicators, systems, and/or methods

ж The discipline to follow through on trading signals

ж The discipline to take losses and profits when so indicated by the system or method being used for day trading

I will dispense with preliminary definitions and explanations rather quickly. This book is intended for traders who already have an understanding of the markets and of trading basics. Experience in trading would also be helpful. Therefore, please do not consider my cursory treatment of any subject herein to be a denigration of its importance. It is merely an indication that the information is either too basic or that it has been discussed in my other books. For those seeking an introductory text on day trading, please note that the basics of day trading have already been discussed in my book The Compleat Day Trader (1995). This book provides a thorough examination of day trading rules, procedures, and basic principles, as well as several trading systems or methods.

Why Day Trade?

If you plan to take the time, energy, and effort to day trade, it would be a good idea to know why. The mere attraction or sex appeal of day trading is insufficient reason to get involved in this intensive, frequently time-consuming, and potentially costly venture. The most obvious answer to the basic question "why day trade?" is "to make money." But the motivation to trade is not often simple. In order to day trade profitably, it is important to first understand and acknowledge what motivation, if any, exists above and beyond the simple profit incentive.

Given my own extensive experience in day trading, as well as my observation of other day traders over the years, here are some thoughts about why one might want to consider day trading: