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а(Frequently Asked Questions)

In much wisdom is much grief: and he that increaseth knowledge increaseth sorrow.

ecclesiastes 1:18

What Equipment Will I Need to Day Trade?

The type of equipment, software, and price quotations you wil need are a function of the trading methods you have selected. A] of the methods that I have discussed in this book that require eithe 10-minute, 20-minute, or 30-minute data will require you to have ; live, tick-by-tick data feed as well as a computer and software t process the data and indicators. I have often been asked if delayec data can be used. My answer is a categorical and emphatic no. Ti day trade with delayed data is to begin with a handicap. For th relatively small amount of money you will save by using delaye< data, the limitations you will experience will not be worthwhile.

I have also been asked if data delivered via Internet is accept able. My answer is yes, as long as the time delay is not significant The longer the lag behind the data that comes off the trading flooi the less likely your chances of success. It's that simple. So if you' like to begin day trading with your best foot forward, do it righ and get live data that is not delayed. There are a number of vendors who provide such data. Note that unless you plan to trade on all of the exchanges or in all of the markets, you won't need to buy live data for all markets. And this could save you a considerable amount of money.

Several excellent software programs are available for processing the tick-by-tick data. You will need to do some homework in order to find out which one of them is best for you. Costs can vary considerably, so take your time and decide. Some software vendors offer a free trial period. Take advantage of it. This is an important and often expensive decision, so please don't take it lightly. The computer hardware you'll need depends on the software you buy, so make that decision last, not first, unless you plan to buy a top of the line high-speed computer that is loaded with memory and disk space.

What Methods or Systems Should I Use?

The systems or methods you will use in day trading should be chosen by you, not by me. Only you know how much you can risk, how attentive you can be to the markets, how you relate to different systems, and how much discipline you have. So take your time before you decide what method or methods to trade. Evaluate them. Watch them in real time. Paper-trade them for a while if you like. Take a test-drive and trade them briefly in real time. Then decide what works best for you.

Wouldn't It Be Best to Trade the Most Accurate Systems?

Accuracy is not nearly as important as most traders believe it to be. More important than accuracy are drawdown, maximum consecutive losing trades, and average profit or loss per trade. If your system has reasonably low drawdown, a small number of consecutive losers, and a high average profit per trade, then the accuracy won't matter too much. Trading systems with a low accuracy rate can make money if the average profit per trade is high and if the risk is managed effectively. As a rule of thumb, try to avoid systems that have an accuracy rate of less than 55 percent. Note that there are many systems whose accuracy falls in the 40 percent to 54 percent range that have shown excellent overall profits with large average profit per trade.

There is nothing wrong with such systems provided you have the discipline to follow them. They will lose more often than they win, but when they win they'll win big for you. Just remember that one of the things that causes a trader to lose his or her discipline is a string of losing trades. Low-accuracy systems tend to have long strings of losing trades. And this will test the resolve and discipline of even the best traders. Be forewarned! You may be better off trading a system that has a relatively small average profit per trade but high accuracy than a system that has a large profit per trade but relatively low accuracy. A lot depends on your personality and temperament.