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Can I Realistically Compete with the Floor Traders When I Day Trade?

I do not believe that most day traders compete with the trading floor. Pit brokers do not do the same thing we are trying to do. Their trading is, for the most part, based on scalping, or shaving a tick or two off trades as often as possible each trading day. Since floor traders pay very small commissions, they can make a profit on one tick in many markets. Those of us who trade off the floor can't do that. Therefore, we do not compete with the typical floor trader.

There are floor traders who attempt to extract larger moves than a few ticks within the day time frame. I do not consider them competition either. They tend not to use the same types of systems that we are using. Many do not trade based on a system but rather on their "read" or intuitive sense of the markets. They judge the direction of a market based on their sense of what the trading floor or large traders are doing, on the source of large orders, or on the reaction of the pit to news and events. This is not to say that there are no systems traders on the floor. There are. But I do not believe that their aggregate trading is sufficient to overcome the power of thousands of off-the-floor day traders.

Why Can't I Hold a Trade Overnight If I'm a Day Trader?

Note that I am not telling you can't hold a trade overnight. I'm merely saying that if you do, then by definition it is not a day trade, and you therefore open yourself to the potentially negative influence of events and developments that could adversely affect your positions. I am also not representing that carrying a trade overnight is always a losing proposition. I have demonstrated in this book that some of the systems I have developed actually perform better if carried overnight. But remember that in addition to the exposure of holding a position overnight, the result may be a margin call due to the increased margin you will have to post since your positions will have been carried overnight.

How Many Markets Can I Realistically Trade in One Day?

With the assistance of a computer quote system, you can track many markets during a day. Realistically, however, you may only be able to trade seven different markets a day. If you trade the markets actively, then you'll know that only a handful of markets can actually be day traded given volume and volatility. There may only be from four to six markets that are worth day trading.

How Flexible Can I Be in Following Your Systems?

Many years ago I would have told you that being flexible is important. Today I know differently. I suggest that once you have researched my systems and once you have worked with them to see how you fit them and how they fit you, be as inflexible as possible in following the systems. If there are any rules you must not break they are the rules governing risk management. Take your losses when your system tells you to do so.

Can I Enter a Market with One System and Exit with Another?

Some traders like to combine systems. I do not consider this good practice. A system is a system because its performance is based on a set of rules generated specifically for the conditions and markets that were tested. To combine one system with another, picking and choosing entries and exits based on each system, is not recommended. If you trade a system, then trade that system to the exclusion of all else.