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The Profit Potential

аThis is clearly the most obvious reason. Given the wide market swings that are now commonplace in many of the futures markets, both domestic and foreign, many opportunities are available within the time frame of a single trading day. In addition to the wide price swings, the intraday market trends are often persistent. By this I mean that once a market trend begins within a given day, that trend tends to persist. Clearly this is not always the case. Market trends can and do reverse within the time frame of a day, but there are systems, methods, and procedures by which the day trader can take advantage of such changes or, at the very least, protect his or her position when such changes in trend occur.

In S&P 500 futures, the quintessential day traders' market, price swings of over 1000 points within the day time frame are relatively commonplace. This is a $2500 trading range, which is certainly large enough for the day trader. Figure 1-1 shows a daily price chart of S&P 500 futures for the period from October through

December 1997. I have marked an "X" by each day that had a trading range of 1000 points or more. As you can see, there were many such days, all of which provided ample and potentially profitable opportunities for the day trader.

Large daily trading ranges also occur regularly in Treasury bond, coffee, Swiss franc, British pound, and Japanese yen futures. The petroleum futures markets have also had large daily trading ranges but with less frequency than the markets cited above. In addition to these markets, a number of European futures markets have had large daily trading ranges. Hence, the opportunities for day trading exist in many different markets both domestically and abroad.

Naturally, where there exists the opportunity for profit, there is also the risk of loss. Even the least experienced trader understands that there is a risk of loss, but it is imperative that I underscore this risk lest any readers conclude that day trading somehow involves less risk than position trading.

The Challenge. Yet another very viable reason for day trading is the challenge of the game. Although this is clearly a secondary motive to the profit incentive, many of us derive considerable personal satisfaction from a venture that can both make us money and satisfy an intellectual or competitive need at the same time. When a trader is new to the markets, the main goal is survival with the hope of profit: Once the game has been learned, the goal is profit as well as mastery.

The challenge of successful day trading is one that has lured many a trader over the years. And many traders have been left in the ashes of ruin as a consequence of playing the game with faulty tools or without discipline. Therefore, to a given extent, the ability to day trade profitably with consistency is a measure both of an individual's ability to understand the markets and to develop profitable tools based on these understandings, and then to put these understandings into action.

The Fame. The lure of fame cannot be ignored as one of the reasons traders undertake day trading as either a hobby or as a profession. Hopefully, the ego of the trader as well as the need for fame will not overshadow the desire to make a profit. But fame as a day trader cannot be achieved without profitable trading or system development. Let fame be the least of your goals as a day trader lest the need overshadow the commitment and the methodology.