Aug

18

Day Trading Lessons Learned– Halfway Through August

August 18, 2007 |

Since I am not working in a traditional 9 to 5 job anymore, decided that rather than eating up my interests and dividends, I would try to live out of very short term trading of good but volatile stocks – while I am in between contracts. I consider myself an above average long term investor. However, when it comes to Day Trading, I must accept the fact I am just a beginner, with just but a few words of advice to offer. These are the things that I have learned so far this month (in no particular order):

  • Don’t Be Greedy - So far I am aiming at winning around double of what I earned on a workday when I was working. The longer you hold a winning stock, the longer you risk being trapped with it. If it is so good that you think it will climb over the next few months, buy it for the long therm.
  • Don’t trade in the late afternoon or in a Friday afternoon for that matter. Too risky to have to keep the stock ’til the next day.
  • Don’t buy at the market highest - If the market has climbed 300, sell whatever you where going to sell, and take the rest of the day off. You can also sit on the sidelines, to wait until profit takers have done their thing, and get any good goods they may have dumped. Buy only when there is plenty of room to grow.
  • Buy recommended stocks only - Buy from sectors that are growing. Buy from stocks that analysts love. Day Trading is not the time to be a contrarian – use long term positions for that. You do not want to loose money on a stock that will climb, but six months from now. You need it to climb today if you are Day Trading.
  • Follow your instincts - There are days that smell bad. Days that you just can’t read where things are going. Take the day off. That is one of the reasons you aim at making double your daily needs – for those days you need to take off.
  • If you feel too exited or too tired, don’t get into a new position - Once you have made a good trade… celebrate. Stop. Go and get a cup of coffee. Unless you are absolutely sure about your next trade, take time to rest and think your next move. Chances are that you could do better by taking the rest of the day off than by getting yourself into a mess.

How am I doing so far? I am more than 85% over my salary-equivalent of a full month on my trading in August. I do not know if I have been extremely lucky, or extremely insane. I would be happy if I can get 50% of my salary-equivalent – I can live on that easily, and will allow me to keep my dividends and interests compounding themselves. Who knows how I will do next.

Where do I think I should improve? - To know when to get rid of a bad trade – and do it soon enough. To control my emotions. To have better disciplines. And to try slow-building and fast selling approach where I slowly build my position during the downturn of the stock during the day, and sell it at a profit on the upturn (may allow me to save some trading power for when the stock goes down a bit more).

Will keep you updated with what I learn on the next half of August.


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