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Beginning with Sufficient Capital

Perhaps one of the worst blunders that any trader could commi whether trading from the day time frame or from a position tradt perspective is to attempt trading with insufficient capital. The argument may be made that the day trader does not need to havt substantial capital in his or her account, since trades are closed ou at the end of the day and therefore the necessity for sufficient mar gin to maintain positions is eliminated.

While this may be true, it is also true that those with limitec funds cannot play the game as long as those with larger funds can It is important in any venture to start with sufficient capital ir order that the trader not feel pressured to perform and to allow the particular trading system or methods sufficient opportunity tc ride through periods of poor performance.

The trader with limited capital will not only be a nervous tradei looking always to minimize losses beyond the point of realisti< trading, but also will frequently be knocked out of the game after < series of losses, before his or her trading methods have had th< opportunity to perform. Consequently, capitalize your trading account sufficiently or decide ahead of time that you will trade onh a very limited portfolio consistent with your available capital. Dc not start with an undercapitalized account, since this is a near-cer tain invitation to failure. In order to begin trading with sufficien capital, the aspiring trader will have to be realistic and, above all patient enough to gather the speculative capital that will be needed.

The Ability to Use News to Your Advantage

Many a trader has learned the hard way that following the new; can frequently lead to losses. I have discovered that there are way; in which the trader may use the fundamental news or developing international, domestic, or political news to his or her advantage. To use the news in your favor, do not be a follower of the news, rather "fade" the news. Use the news to exit positions that you have most likely established well before the news has become public knowledge. I am a firm believer in the old market dictum: buy on rumor, sell on news.

On an intraday basis, markets are very sensitive to news well before the news is known by most traders. Insiders buy and sell on expectation, sometimes based on rumor, frequently based on fact. They establish positions before the general public is aware of the news, and once the news has become public knowledge, they take advantage of the surge or the drop in prices to exit positions.

Therefore, if you wish to use the news to your advantage, you must be a contrarian. This is especially true from the day-trading perspective. Although there is nothing wrong with following intraday trends, frequently intraday trends react strongly to news developments. If you are following your trading system or method, you will most often be on the correct side of the market when such news develops. Take advantage of price surges or declines to exit your position. This requires self-control and the ability to see the news as your opportunity to get out, not as your opportunity to hold on for even more profit!