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10 rules for Rookie Day Traders

  
  Education
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1. The three E’s: enter, exit, escape

Rule No. 1 is having an enter price, an exit price, and an escape price in case of a worst-case scenario. This is rule number one for a reason. Before you press the “Enter” key, you must know when to get in, when to get out, and what to do if the trade doesn’t work out as expected.

Escaping a trade, also known as using a stop price, is essential if you want to minimize losses. Knowing when to get in or out will help you to lock in profits, as well as save you from potential disasters. 

2. Avoid trading during the first 15 minutes of the market open

Those first 15 minutes of market action are often panic trades or market orders placed the night before. Novice day traders should avoid this time period while also looking for reversals. If you’re looking to make quick profits, it’s best to wait a while until you’re able to spot rewarding opportunities. Even many pros avoid the market open.

3. Use limit orders, not market orders

A market order simply tells your broker to buy or sell at the best available price. Unfortunately, best doesn’t necessarily mean profitable. The drawback to market orders was revealed during the May 2010 “flash crash.” When market orders were triggered on that day, many sell orders were filled at 10-, 15-, or 20 points lower than anticipated. A limit order, however, lets you control the maximum price you’ll pay or the minimum price you’ll sell. You set the parameters, which is why limit orders are recommended. (more…)

Enthusiasm Brings About A Triumph

  
  Education
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The greatest victories in life rarely come from those who are sad, pessimistic or lacking enthusiasm.
When we approach challenges in any area with enthusiasm, we set a new foundation that starts us off on the right foot. This does not automatically happen. We all need to decide that we are going to start changing the way we begin our trading sessions.
Before we jump on our computer and look at our charts and start executing trades, take about 15 minutes to set the tone for this session. Take a few deep breaths, forget about the list of tasks that you have to deal with today, get a piece of paper and write down 1 or 2 items that you will focus on during today’s trades.
Once you have your mind set and your 2 items ready; say out loud “I am ready to trade”. Say this with enthusiasm and then sit down and begin.
You will have a new perspective on today which does not include focusing on the profit results, but instead on the process. Your trading session will have new meaning and you are now set to be triumphant in today’s trades.

Buffett: Capitalism Works

  
  Education
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Here’s a recent interview with Warren Buffett in which he discusses a broad array of topics.  It’s worth 15 minutes if you have the time, but here’s the bullet points:

  • The US economy is still growing and “will continue” to grow into 2014.
  • Confidence creeps into a system while fear overwhelms it quickly.  It takes time to get the confidence back.
  • The American system has always persevered.  We’ve questioned capitalism time and time again, but the system works.
  • We’re 6 TIMES better off now than when Buffett was born.
  • The recovery is being driven by the “natural juices of capitalism and not the government”.
  • Advice for entrepreneurs: listen to your customers.
  • The capitalist system works because it unleashes human potential.

10 Rules for Rookie Day Traders

  
  Education
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Here is our philosophy around trading rules:

Rule should be designed to promote growth, not create limitations.
Rules should make YOU better.
Rules need to be second nature.

1. The three E’s: enter, exit, escape

Disagree, I can’t explain for proprietary reasons.

2. Avoid trading during the first 15 minutes of the market open

I agree that the first 15 minutes is risky but the most important thing to a new trader is lasting as long as possible. You are going to be better the more time that goes by, but you learn faster by doing. It is a tough balance.

3. Use limit orders, not market orders

Limits keep you out of the market, which is important. But they can also keep you in a market, which is of importance too.

4. Rookie traders should avoid using margin

Agree. Your winning positions should be larger than losing position, but a new trader doesn’t usually know which is which.

5. Have a selling plan

Agree. (more…)

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