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Trade active markets only

ВрHere is a bit of advice I've given you repeatedly throughout the book; however, I cannot stress it too strongly. By trading in active markets only, you will avoid the problems which come with thinly traded markets and the relatively poor price execuВэtions which are so common in such markets. As a day trader, you must have liquidity in order to move into and out of your positions easily and without too much slippage. Moreover, if you intend to trade large posiВэtions, then liquidity is absolutely essential for success. As a day trader, you do not have the time to wait too long for price executions to be reported to you, nor will you have the time to go back and forth with different price orders in an effort to have your positions either entered or closed out.

Since markets wax and wane in terms of trading activity, you will need to evaluate this on an ongoing basis in order to make certain that you are participating in actively traded markets. If you find yourself trading thin markets and experiencing all the difficulties which go along with such markets, then I assure you that you have no one to blame but yourself since you have violated one of the cardinal rules of day trading.

As this book is being written, the active futures markets are as folВэlows: S&P 500, Treasury bond, Swiss franc, Deustch mark, British pound, crude oil, Eurodollar, and a handful of other futures markets. As you can see, the number of vehicles open to the day trader is rather small. But this, I assure you, is a blessing in disguise. An effective day trader cannot spread him- or herself too thin among too many choices.

20. Be a contrarian. Some of the largest intraday moves occur when they are least expected. The general trading public and a vast majority of professionals will be on the wrong side of the market when these moves happen simply because they get blindsided by their collective sentiment. Mob psychology is a very important factor which may be used to the advantage of the day trader. If you find that the market senВэtiment (see previous discussion of market sentiment) is heavily weightВэed on one side of the market or another, then watch closely for timing indicators which will give you market entry on the opposite side of majority opinion.

While these are just a few of the important things to remember if you sincerely want to be a successful day trader, they are by no means the only prerequisites to success. I urge you to develop and maintain your own list which is derived from your experiences as a day trader, since your own list will be considerably more meaningful to you. The foregoВэing is merely a beginning, a base upon which I urge you to build on your own.

Now it's time for you to strike out on your own, and /or to integrate my tools into your trading style. I don't claim to have all the answers, and I don't give you any guarantees other than to tell you that with perВэsistence, patience, and motivation you will succeed. If I can help you, then don't hesitate to contact me at the address previously given. I have learned enough about the markets in my more than 20 years of trading to know that the more I learn, the more there is to learn. And I also know this: that which has worked best for me is that which is both the most simple to do and the most simple to understand.