How to Day Trade for a Living
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How to Day Trade for a Living A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology © Andrew Aziz, Ph.D. Day Trader at Vancouver Traders Visit us for Free Education and Resources www.Vancouver-Traders.com DISCLAIMER: AMS Publishing Group and Vancouver Traders (“the Company”), including its employees, contractors, shareholders and affiliates, is not an investment advisory service, a registered investment advisor or a broker-dealer and does not undertake to advise clients on which securities they should buy or sell for themselves. It must be understood that a very high degree of risk is involved in trading securities. The Company, the authors, the publisher and the affiliates of the Company assume no responsibility or liability for trading and investment results. Statements on the Company's website and in its publications are made as of the date stated and are subject to change without notice. It should not be assumed that the methods, techniques or indicators presented in these products will be profitable nor that they will not result in losses. In addition, the indicators, strategies, rules and all other features of the Company's products (collectively, “the Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented are for educational purposes only. Accordingly, readers should not rely solely on the Information in making any trades or investment. Rather, they should use the Information only as a starting point for doing additional independent research in order to allow them to form their own opinions regarding trading and investments. Investors and traders must always consult with their licensed financial advisors and tax advisors to determine the suitability of any investment. Table of Contents Chapter 1: Introduction In this book, I explain the fundamentals of day trading and how day trading is different from other styles of trading and investing. In the process, I also describe important trading strategies that many traders use each day. This book is deliberately short so readers will actually finish reading it and not get bored halfway through and put it to one side. We are all distracted by Internet diversions, emails, or notifications or the dozens of other apps that we have on our smartphones or tablets. Therefore, this book is concise and it is practical. If you are a beginner trader, this book will equip you with an understanding of where to start, how to start, what to expect from day trading, and how you can develop your own strategy. Simply reading this book will not make you a profitable trader. Profits in trading do not come from reading one or two books, but, as I will explain later, profits can come with practice, the right tools and software, and proper ongoing education. Intermediate traders may benefit from this book’s overview of some of the classic strategies that the majority of retail traders use effectively. If you don’t consider yourself a novice trader, then you may wish to jump ahead and start reading at Chapter 7 for an overview of the most important day trading strategies. However, I encourage you to skim through the earlier chapters as well. In my opinion, the most important lesson that you can learn from reading this book is that you will not get rich quickly by day trading. Day trading is not similar to gambling or playing the lottery. This is the most important misconception that people have about day trading and I hope you will come to the same conclusion after reading this book. In fact, statistically speaking, 90% of people who start day trading fail and lose their money. It is easy to be one of those nine out of ten people. It is very easy. This brings you to my first rule of day trading: Rule 1: Day trading is not a strategy to get rich quickly. A very common misconception that people have about day trading is that it is easy - you buy stocks, and when they go higher, you sell them for a good profit. “It’s that easy.” Well, if it were that easy, then everyone would be a successful trader. You must remember that day trading is difficult and will not make you rich quickly. If you have this misconception, and if you want to get rich quickly and easily in the stock market, you should stop reading this book right now and spend the savings that you put aside for day trading on a nice family vacation. It would be much more satisfying to spend your money that way, rather than losing it in the stock market. In day trading, you will be competing with the sharpest minds in the world. The market is a massive crowd of traders, with each trader trying to take money from the others by outsmarting them. The main objective of day trading is to take money from other traders while they are trying to take yours. That’s why it’s such an intellectually intense business. You do not generate money in the stock market. The only reason there is money in the market is that other traders have put it there. The money you desire to win belongs to other traders and they have no intention of giving it to you. That is why trading is such a hard business. This leads to my second rule of day trading: Rule 2: Day trading is not easy. It is a serious business, and you should treat it as such. You can succeed in day trading only if you handle it as a serious intellectual pursuit. Emotional trading is the number one reason traders fail. You will need to practice self-discipline and defensive money management. Good traders watch their capital as carefully as professional scuba divers watch their supply of air. In day trading, simply being better than average is not good enough. You have to be significantly above the crowd to win in day trading. Unfortunately, day trading often appeals to impulsive people, gamblers, and those who feel that the world owes them a living. You cannot be one of them and you should not act like they do. You must start developing the discipline of a winner.Winners think, feel, and act di f f erently than losers. You must look within yourself, discard your illusions, and change your old ways of being, thinking and acting. Change is hard, but if you wish to be a successful trader, you need to work on changing and developing your personality. To succeed, you will need motivation, knowledge, and discipline. So, then, what is day trading? In reality, day trading is a profession, very much like medicine, law and engineering. Day trading requires the right tools and software, education, patience and practice. You will have to dedicate countless hours reading about trading styles, observing how experienced traders are trading, and practicing in simulator accounts to learn how to trade with real money. An average successful day trader can make between $500 and $1,000 every day. That’s equal to $10,000 to $20,000 a month (based on about twenty trading days in a month) which equals $120,000 to $240,000 a year. So why would anyone expect a job that pays this well to be easy? Doctors, lawyers, engineers and many other professionals go through years of school, practice, hard work and examinations to earn a similar income. So why should day trading be any different? So if it isn’t easy and doesn’t get people rich quickly, why would you want to day trade? What makes day trading attractive is the lifestyle. You can work from home, work only for a few hours each day and take days off whenever you wish to. You can spend as much time as you want with your family and friends without requesting vacation time from a boss or manager. You are the boss. Since day trading is a form of self-employment, you are the CEO and you make the executive decisions for your business. The lifestyle is extremely attractive. And, of course, if you master the profession of day trading, you can potentially make thousands of dollars every day, far more than in most other professions. I personally know some traders who average over $2,000 every day. Some days are lower and some days are higher, but over the long term, they have a profit of over $2,000 every day. No matter where you live and how you live, $2,000 a day is a substantial amount of money and can contribute to a very satisfying lifestyle. If you want to own your own business, day trading is a simple place to start. Take a moment and compare day trading with opening a pizza shop or a restaurant. If you want to open a restaurant, you’ll have to spend large amounts of money on rent, equipment, staff hiring and training, insurance and licenses - and you still won’t be guaranteed to earn money from your restaurant. Many businesses are like that. Day trading, on the other hand, is very easy to set up and start. You can open a trading account today, at no cost, and then start trading tomorrow. Of course you should not do that until you educate yourself, but the logistics of commencing day trading are extremely easy compared to many other businesses and professions. Day trading is also an easy business to manage the cash flow of. You can buy a stock, and, if things go badly, you can immediately sell it for a loss. Compare that to people who have import- export businesses and are importing goods from other countries. There are plenty of things that can go wrong when purchasing shipments of goods to sell in your own country - problems with vendors, shipping, customs, distribution, marketing, quality and customer satisfaction - plus, your money is locked in for the entire process. Unless everything goes well, you can’t do anything about it. At times you cannot even accept a small loss and easily step away from your business. With day trading, if things go wrong, you can come out of the trade in a few seconds with an action as quick and simple as a click (and, of course, a small loss). It is easy to start over in day trading and that is a highly desirable aspect of any business. Closing a day trading business is also easy. If you think day trading is not for you, or if you don’t make money from it, you can immediately stop trading, close your accounts and withdraw your money. Aside from the time and money that you have already spent, there are no other costs or penalties. Closing other professional offices or businesses are not nearly as straightforward. You cannot as easily close your store, office or restaurant, or lay off your staff or walk away from your lease or equipment. Why then do most people fail in day trading? I will explain specific reasons behind this important question later in this book but, overall, in my opinion, the most common reason that people fail in day trading is that they do not regard it as a serious business. They instead treat it as a form of gambling that will quickly and easily make them rich. Some people start to day trade as a hobby or for fun because they believe it is “cool”. They trade for the thrill of short term gambling in the markets. They play around a little bit in the market but never commit themselves to acquiring a proper education or an in-depth awareness of day trading. They may get lucky a few times and make some money, but eventually the market will punish them. This is actually my own story. At the beginning of my trading career, a company called Aquinox Pharmaceuticals Inc. (ticker: AQXP) announced some positive results for one of its drugs, and its stock jumped from $1 to over $55 in just two days. I was a beginner at the time. I purchased 1,000 shares at $4 and sold them at over $10. What looked like a very good thing however, turned out to be very bad. I had made over $6,000 in a matter of minutes on my first beginner trade, leaving me with the impression that making money in the market was easy. It took me time and several severe losses to get rid of that very mistaken notion. It was pure luck. I honestly had no idea what I was doing. In just a few weeks, I lost that entire $6,000 by making mistakes in other trades. I was lucky because my first stupid trade was my lucky one. For many people, their first mistake is their last trade because they blow up their account and have to desperately close, leave and say good-bye to day trading. New day traders should never lose sight of the fact that they are competing with professional traders on Wall Street and other experienced traders around the world who are very serious, highly equipped with advanced education and tools, and most importantly, committed to making money. Never forget Rule 2: day trading is a business, and it’s an intensely serious one. You have to wake up early in the morning, do your preparations every day on the stocks that you plan to trade, and be thoroughly prepared before the market opens. Imagine for a moment that you have opened a restaurant. Can you afford not to be ready for your customers when you open your doors? You can’t close the restaurant at lunch time because you aren’t feeling well or you’re not in the mood or you didn’t have time to order enough groceries for the kitchen staff to prepare meals with. You must always be ready. The day trading business is no different. Day trading requires proper tools, software and education. As with any business, you must have the right tools to succeed. So what are the basic tools you need for your day trading business? 1. Enough capital (money) to trade with (at least $5,000 if outside of the USA and $25,000 if a resident of the United States). 2. High speed Internet service. 3. The best available broker. 4. A fast order execution platform that supports hotkeys. 5. A scanner for finding the right stocks to trade. 6. A community of traders. Some of these tools must be paid for every month. Just as other businesses have monthly bills for electricity, software, licenses and leases, you have to be able to pay your Internet provider’s monthly bills, your broker’s commissions, scanner costs and trading platform fees. If you are part of a paid chatroom or community, you can add the cost of that membership to this list too. Chapter 2: How Day Trading Works In this chapter I will review many of the basics of day trading and hopefully answer your questions about what day trading is and how it works. The chapter will also introduce some of the main tools and strategies that you’ll come across later in the book. As with any art form, tools are of no value unless you know how to use them. This book will be your guide in learning how to use these tools. Yüklə 2,09 Mb. Dostları ilə paylaş:
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