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Definition of Terms Day Trading, Day Trader

Before digging too deeply into the technical aspects of day trading, we'll need to examine some housekeeping details which pertain to our task. First among these is a brief but necessary definition of terms. The futures markets have their own language without which they could not function and without which you will be unable to trade. So let's take a look at some important terminology which will be used throughout the text. These terms are not presented in any order other than, perhaps, freВэquency of use.

Definition of Terms Day Trading, Day Trader. In order to avoid confusion or misunВэderstandings, I'll first define for you the terms day trading and day trader. Although you may think that this is an unnecessary waste of time and space, I cannot tell you how surprised I am at the all-too-common lack of knowledge which most individuals have about day trading, what it is and what it is designed to achieve.

A day trade is a trade which is entered and exited on the same day. It does not mean that the trade will be held overnight, that it will be kept overnight if profitable, that it will always be entered on the opening and exited on the close, or that it will not entail risk. Day trades are always over by the end of the trading day. By definition they are no longer day trades if carried through to the next trading session. True day traders will not hold positions to the next trading session regardless of how they have fared during the day. Succinctly this means that a loss is a loss and a profit is a profit and that all scores are settled by the end of the trading sessionтАФwin, lose, or draw. Day trades may be entered at any time during the day, but they must be closed out by the end of the day.

Position Trader, Position Trading.Вр A day trader is one who day

trades. As soon as a day trader holds a position overnight, he or she cannot refer to the trade as a day trade or to him or herself as a day trader. A position trader, however, holds trades for an extended period. The position trader in futures is like the investor in stocks, albeit with a shorter time perspective, which is not necessarily limited by the life of the futures contract.

There is no crime in being a position trader and certainly no crime or embarrassment in being a day trader. However, you must be careful what you tell yourself, or you may begin to believe it. A day trader is an individual who is committed to a certain specific course of action. To sway from this course of action is to subvert the program. To stray from the program is to abandon its principles and to acquire a new set of expectations which may not be consistent with the original objective. I urge you, therefore, to be committed to your course of action once you have determined it.

If you wish to be a position trader, then do yourself a service and do not refer to yourself as a day trader, lest you confuse your objectives. Simply stated, what's right for the position trader is not necessarily right for the day trader and vice versa. Position traders may be willing, for example, to carry a losing position for quite some time in the expecВэtation that it will eventually become profitable. To the day trader, this is a violation of the cardinal rule.

Is it not possible, you ask, for traders to wear different hats at differВэent times or many hats at the same time? Absolutely! There is nothing wrong with trading in many different time frames at the same time, proВэvided you do so with specific structure and follow specific rules which will be explained to you later on in this book. But remember, this book is primarily, in fact, exclusively, for the day trader.