How to Day Trade - Ross Cameron

Last updated Nov 17, 2024

• Author: Ross Cameron
• Full Title: How to Day Trade
• Category: #books

Day trading is like a magnet that strongly attracts some people and strongly repels others. The problem is that it often attracts the wrong people, and drives away other folks who might be great at it, if they only knew the facts. (Location 108)

during seventh and eighth grade. My teacher Kevin did an amazing semester on the stock market, where he had us pair up. My buddy Cooper and I created a dummy portfolio and each day we’d chart the prices in class and discuss the stocks. (Location 222)

thing you can do as a foundation for day trading. You should want to explore trading through genuine curiosity about learning it, and not from the pressure of putting food on the table. (Location 302)

these services wouldn’t teach you to develop your own strategy, because it would be bad for their business model. (Location 325)

In my second year, I lost everything that I had made in the first year. (Location 338)

Following the Great Recession of 2007-2009, many people had a deep loathing for the big Wall Street banks that brought the financial system to its knees. (Location 363)

it was now just me and my dog. I cut firewood and also cut every expense I could think of. I made Craigslist ads for stuff in my barn— stuff that I didn’t really need. Through all of this, I was able to buy myself some time and extend that runway. (Location 375)

A “swing trade” is where you hold a stock for days or weeks, (Location 383)

During the time my account was offline, I had time to think. One thing I believe I’ve always been good at is figuring stuff out, instead of just throwing the whole thing out the window. (Location 411)

What was I doing differently when I made money, from when I lost it? (Location 421)

there were times a stock could make big moves due simply to a “technical breakout” or a “short squeeze” where the stock performed outside of expected parameters and traders took notice. I decided that focusing on stocks with news would be better, but eventually I might be able to trade stocks without news if they proved they were strong. (Location 432)

shares available to trade. This is called the float, and lower float stocks are more volatile than ones with a higher float. (Location 436)

Following an IPO, a company can do secondary offerings to sell more shares; this is a form of dilution and generally reduces the stock price. Companies can also conduct share buybacks or reverse splits. Both effectively reduce the number of shares available to trade. (Location 438)

High demand and limited supply creates an imbalance, which leads to momentum and volatility. This is what real day traders are looking for. (Location 446)

Trading a little of everything can be good early on because you’ll discover what strategies match your risk tolerance and personality. (Location 456)

Based on my self analysis, my best trades were on stocks that were up over 10 percent, had high relative volume, had some type of breaking news, were priced between $ 2 and $ 20, and had a float of fewer than 50 million shares. (Location 465)

I would be green, then I would give back half of my profit and would keep trading; I would hold past my max loss on a trade and hope it bounced back; I would average down on a trade (adding to a loser); I would trade past the maximum daily loss amount I’d previously set as a boundary; I’d trade even after having three consecutive losers, a red flag that should have told me to stop; I’d revenge trade, where I tried to make up for previous bad trades by jumping prematurely into another; (Location 486)

I’d then get furious at what just happened to that last trade and would FOMO in long at the very top (FOMO is “fear of missing out” and I’d buy at the top— when the signals told me not to— just in case it was going higher). (Location 491)

I was bad at walking away when I was having a bad day, and it was costing me a lot of money. (Location 494)

successful traders did not trade for ten hours a day. The focus and discipline to be ON— to be watching a stock second by second intently— simply could not be done for ten hours a day. (Location 498)

I got into a routine, kept myself busy, and I felt very productive. In fact, it almost felt like therapy, because I was in control of my tiny little world: (Location 504)

When I saw it clearly, I was going big. Get green, and shut it down. If I didn’t see it, I wasn’t touching it. (Location 518)

focus on the gap scanner each day. This screen showed me which stocks were set to open the highest relative to where they closed the previous day. (Location 530)

Traders flock to the top ten gappers. (Location 532)

I wait for a stock to start to move, and then I jump in. I wait for it to prove itself: not that it’ll necessarily be the next Apple, but that today, it has the potential to squeeze up 20-30 percent or more. (Location 545)

It’s true that you’re battling a little with other traders to get in before the next guy, so to speak. But for a lot of these stocks, I’ve found that there is enough volume and enough trades for many small traders like me to participate. (Location 557)

there is more to be gained by chatting with the right sort of people than there is a risk that you’ll somehow give away your edge. After all, we’re little traders (Location 564)

Except before I actually sent him the money, I had a little bit of a funny feeling. I decided to do some digging. (Location 575)

This application of rules to historical data is known as “back testing.” (Location 608)

Back-tested results captured a few details about how the markets performed, but they did not record the extraordinary complexity of the minute-by-minute market. (Location 613)

the stock market is like a flowing river. You’re standing there, in the river, with your fishing rod. You cast the rod intending to land your hook and bait in a certain spot, but you end up being one foot south of the spot you were looking at. (Location 618)

The stock market operates in intervals of milliseconds (one thousandth of a second) and microseconds (one millionth of a second). (Location 621)

I also get clarity from putting my thoughts into words. (Location 640)

I never found a resource with this sort of focus just on day trading when I was starting out. Even though my website was new, I began to rank well in Google for very specific keywords (Location 648)

I can take part in the crazy high-tech world of minute-by-minute day trading, while looking out my window at a backyard filled with birds, chipmunks, and the occasional fox. (Location 675)

What makes sense for anyone wanting to try to trade like me is to mimic the principles and techniques I use to trade, including the strategy, the tools, what to look for, problems to avoid, and so on. (Location 705)

Each of us is dealt a set of strong and weak cards. What counts is whether you decide to throw away the weak cards, get some new ones, and how you play that hand. Luck and skill will decide the outcome. (Location 710)

I focus on stocks with the following characteristics: Up over 10 percent on the day versus the previous day’s closing price. High relative volume (at least 2.0). Share prices are between $ 2 and $ 10, and not more than $ 20. News or some other catalyst is announced today. Relatively low float and therefore greater volatility (preferably twenty million shares or fewer). (Location 723)

we have a bunch of preconceptions and misconceptions about day trading that can get in the way of learning about how best to approach this business. (Location 730)

What’s great about the stock market is that, among all the different sectors, segments, and financial instruments, there is room for everyone. (Location 776)

by first reducing your risk, you can begin the process of developing strategy and discipline in a safe environment. (Location 787)

Learning how the human emotions of fear and greed translate into price action is critical to your ability to profitably trade the markets. You need to capitalize on emotions in the market without falling victim to your own emotions. (Location 825)

it’s not the news stories that change the price of the stock. Changes in stock price are because of changes in supply and demand. (Location 829)

What the news does is affect the emotions of traders, who then act on their fear, greed, suspicions, intuition, pride, and other strong emotions. (Location 831)

Only when you’re consistently doing at least OK should you even think about using real money. No matter how good you were in the simulator, you’ll discover that trading with real money is different, so there’ll be an adjustment phase. (Location 859)

for the most part we’re anticipating what a bunch of other humans will be thinking, feeling, and acting on in the next five to ten minutes. (Location 869)

How to get continuously better at recognizing patterns you’ve seen before, at seeing new patterns, and at ignoring extraneous stuff. (Location 881)

The trading simulator is like the driving instructor, making sure you don’t get wrecked. Trading in a $ 500 account is like driving your first car. You’ll make beginner mistakes, but the damage is minimal in a small account. Spend all the time you need in that safe environment where the stakes are low. (Location 904)

the vast majority of trades occur in the first few hours of trading, from 7: 30 am to 11: 30 am Eastern Time. (Location 925)

Today’s a new day and yesterday no longer counts. (Location 985)

three monitors and my laptop.) So at home I have four stocks that I’m watching, and one that I’m trading. (Location 1020)

I should have used a simulator and proven that I could be profitable there before ever risking a dime of real money. (Location 1037)

Traders who come into the market needing to make money quickly will typically speed through the process, put undue pressure on themselves, and begin a rapid downward spiral. (Location 1045)

Otto Von Bismarck, the German statesman, said: “Fools say ‘experience is the best teacher.’ I prefer to learn from other people’s experience.” (Location 1060)

Find a group that’s led by people who can prove that they’re successful at day trading, and not people who simply brag with no proof. (Location 1070)

you can reduce your risk of making irrational decisions by listening to the regular thoughts and perspectives of other traders whose opinions you’ve come to respect. (Location 1079)

when you go public, you’ll be forever scrutinized by stock analysts. (Location 1131)

Each exchange has its own rules about the types of companies that can issue stock. (Location 1138)

Many companies realize they could expand and invest in better equipment and a larger staff with those dollars, instead of writing checks to stockholders. (Location 1146)

prospectus. It contains an overview of the company, its management, nature of operations, known risk factors, and prior financial history. (Location 1159)

an annual report, also known as a 10K filing. It becomes public information when we file it and is available at the SEC’s site. Quarterly reports are called 10Q filings. If we have important news to report about our company between quarterly reports, we must issue an 8K. (Location 1162)

market capitalization. If that number is more than $ 10 billion, it’s called a large-cap stock. If it’s from $ 2 billion to $ 10 billion, then it’s called a mid-cap. And if it’s between $ 300 million and less than $ 2 billion, it’s a small-cap stock. (Location 1185)

Minimum spreads are regulated by exchanges. The rule states that stocks priced over $ 1.00 must be quoted in increments of no less than 1 cent. (Location 1210)

active traders will notice a phenomenon where stocks can move slowly when they are 85 or 95 cents a share, but as soon as they cross $ 1.00 they can move much faster. (Location 1217)

A tight spread indicates a higher volume battle between buyers and sellers and is typically associated with consolidation and periods of lower volatility. (Location 1219)

A wide spread typically reflects low participation of buyers and sellers. (Location 1220)

if a stock with a wide spread has breaking news, the wide spread combined with higher relative volume can actually fuel volatility. (Location 1222)

To profit from the frequent buyers and sellers, large institutional investors become registered to serve as market makers. This is a business of arbitrage. (Location 1226)

Competition among market makers— combined with higher participation from traders— create tighter spreads. (Location 1229)

when stocks experience heightened volatility, the algorithms turn off: market makers close up shop to manage their risk. This is when day traders can step in to capitalize on volatility without competing against the institutional traders. (Location 1236)

I don’t love to see a stock with a 1-cent spread, nor do I like to see a stock with a 50-cent spread. There is a sweet spot. More than anything else, what I look for is a fast rate of change. I want to see a stock moving up quickly. Once a stock is moving over 10 percent on the day— and certainly if it’s trading more than 5-10 percent in the last 10-15 minutes— we will see algorithms turn off and volatility spike. Spreads may get bigger, perhaps 10-15 cents on a stock under $ 20, (Location 1238)

Liquidity comes in the form of market makers posting orders to buy and sell shares, as well as individual investors placing orders. (Location 1248)

Publicly traded companies have an investor-relations department that not only does regulatory filings but also handles publicity and news releases. (Location 1257)

Ultimately, the substance of the news headline does matter. Over the course of hours, and certainly over days and weeks, the market will begin to align with the correct value of the company. However, in the moments when news is breaking, and during periods of heightened volatility, stocks can become very disconnected from their true market value. (Location 1264)

It is not the current value of a company that creates its stock market price. Traders and market participants buy up a stock based on the perceived future value of that company. (Location 1273)

That you, as a beginner, will be offered a margin account by your broker should not be interpreted as a recommendation to trade on margin. Your first order of business is to manage your risk. (Location 1283)

In retrospect, I would not trade on margin until I’ve proven that I can make money consistently using my own cash. (Location 1286)

I would have avoided shorting stocks with real money until I established a profitable track record of trading in a simulator for at least 3-6 months. (Location 1302)

The chances of succeeding long term are severely stacked against you— unless you take every opportunity to reduce those risks. (Location 1343)

Carefully curate what you put in your head. (Location 1351)

every moment you must be focused on separating the signal from the noise: what’s happening, what it means, when you detect a pattern, and what to ignore. Do not add the noise of social media to that significant cognitive load. (Location 1354)

Be very careful whom you tell that you’re day trading. (Location 1356)

Focus more on the risk you need to manage, instead of the return you’d like to have. (Location 1368)

A day trader is a hunter of volatility and a manager of risk. (Location 1379)

they describe the trade in terms of expected profit potential and acceptable downside risk. (Location 1385)

the allure of quick profits can lead to new— and even seasoned— traders to ignore what they know, in favor of what they feel at the moment. (Location 1415)

Becoming really good at handling loss can mean the difference between prospering in this business, and washing out. (Location 1420)

Successful traders accept that each trade should have a predetermined level of risk. They articulate that risk level ahead of the trade, and then they adhere to the rules they set for the trade. (Location 1421)

A mistake is when you break the rules of your strategy. A loss is simply when a trade based on your strategy didn’t work as expected. (Location 1430)

The skill to take losses and not allow them to cause you to lose focus is an act of mindfulness. (Location 1436)

Mindfulness is a way of stepping back mentally, and observing what your own brain is doing at the moment. (Location 1439)

a book by Jon Kabat-Zinn called Wherever You Go There You Are. (Location 1440)

The very best traders can experience those emotions without acting on them. When you allow your emotions to overtake your rational thought process, you risk over-trading, exposing yourself to unnecessary risk and excessive losses. (Location 1443)

If you can be a day trader with big money on the line and keep your composure? Well, the run-of-the-mill daily frustrations will also become easier for you to handle. (Location 1447)

you should never even consider taking a trade where you have only focused on the upside and have not set the number where you will sell if things go south. (Location 1461)

a profit/ loss ratio of 1: 2, which we call “inverted” or “negative.” (Location 1484)

I generally look for trades with a minimum 2: 1 profit/ loss ratio. (Location 1492)

aim high with a 2: 1 profit/ loss target, but make sure you can maintain a minimum ratio of 1: 1. In that case, you can break even while being right just 50 percent of the time. (Location 1496)

All traders should know their profit/ loss ratios and their success rate. These numbers will indicate whether a strategy is sustainable. If you can trade with a 1: 1 or even a 2: 1 profit/ loss ratio, it becomes much easier to succeed. (Location 1498)

It’s crucial— but not enough— for me to know my profit/ loss ratio on a trade. I work hard to stick to those boundaries in the heat of trading. Changing risk parameters to accommodate a bad trade has not worked well in my experience. (Location 1516)

think and act like a successful trader. This means selling losers quickly and holding partial positions in your winners as long as possible. (Location 1523)

do a minimum of thirty minutes of exercise and fifteen minutes of meditation every day. (Location 1525)

By forcing myself to do these two things every day, I’m practicing discipline. But I didn’t choose just any two random activities to practice daily discipline on: exercise and meditation help to keep me both mentally grounded and sharp. (Location 1526)

By practicing discipline in other areas of my life, I strengthen that muscle memory and improve my ability to maintain composure while trading. (Location 1529)

Both risk and fear generate discomfort. Rather than look for ways to ignore or skirt around that feeling, I regularly work to train myself to withstand it and make sound decisions, even during that discomfort. (Location 1531)

one big benefit of journaling is that it helps you to develop an awareness of the stress you feel while trading, and to what degree it went beyond feelings and affected your actions in a trading session. (Location 1535)

Discipline is much more like a muscle that you strengthen by exercising it regularly. If you ignore that muscle, it will weaken and eventually atrophy. (Location 1538)

instinct to chase a stock for fear of missing the move, to sell a winner too soon, or hold a loser a little too long. Every day when I trade, I must fight against my natural instincts. (Location 1539)

To maximize my ability to make the right decisions under stress, I try to exercise and meditate every day. It’s one of the best ways to keep my discipline muscle strong. (Location 1546)

Your stop loss should be based not on a hunch, but on a recent support or resistance area. (Location 1553)

We do love volatility, but only up to a point: extremely volatile markets can cause larger losses than we originally planned for. (Location 1557)

There are three elements to a trader’s exposure: share price, the number of shares you are holding, and how long you hold them for. It’s also called the value of the position. (Location 1560)

A longer-term investor typically will not allocate more than 10 percent to any single stock. Contrast (Location 1564)

The exchanges can halt trading at any time, and for a variety of reasons. (Location 1568)

The more common stock halts are because of volatility or pending the release of material news. (Location 1570)

Volatility halts are sometimes called “circuit breaker” halts. If a stock rises or falls over 10 percent in a five-minute period, the stock will be halted automatically for five minutes. (Location 1570)

Stock halts due to pending news is one of the greatest risks in trading. (Location 1574)

a “T12” halt. It happens when the exchange requests additional information from the company. This type of halt can last for weeks or even months, (Location 1578)

Because penny stocks are sometimes used for market manipulation and fraud, a penny stock that goes up 500 percent on no news could be at risk of being halted either pending news or on a T12. (Location 1579)

we have to be mindful of the potential for stock halts and limit our positions on stocks that are at risk of being halted. Penny stocks are one example of this; also be careful with stocks trading on news that has not been released or confirmed by the company itself. (Location 1581)

any time a stock is halted, it can reopen at a much-different price. The risk is that a stock could reopen far below your maximum acceptable loss amount. (Location 1585)

Typically, stocks that halt while going up will then open higher, and stocks that halt while going down will later open lower. (Location 1589)

I set and follow a maximum loss amount per trade, and a maximum loss amount per day. (Location 1603)

once you have exceeded your max loss, your judgment is almost guaranteed to have been compromised. It is always best to walk away instead of attempting to trade in a compromised emotional state. (Location 1611)

About the max loss per trade, I typically set it at about 25 percent of my daily profit target. (Location 1614)

Sometimes I ask my broker to set a max position size (both in shares and dollar value), and a max daily loss on my account. (Location 1624)

it’s better to be safe than sorry. (Location 1628)

“emotional hijack.” This happens when a trade triggers a fight-or-flight response. It’s typically a big loss, though it could also be a big win. I’ve developed awareness of this phenomenon and I notice that, following a triggering trade, my heart will start pounding, my palms are clammy, and I start to get tunnel vision. In this moment my brain subtly shifts from reason and logic to emotional and reflexive responses. (Location 1638)

I’ve become pretty good at knowing my triggers, and I can typically catch myself before crossing the point of no return. (Location 1642)

Developing acceptance of loss through emotional conditioning is a critical part of scaling up any strategy. This is a process of experiencing small losses with no reaction and gradually scaling up the size of your trades until you can experience a loss that at one time might have been triggering. (Location 1649)

I never want to have one trade weighted so heavily with risk that it has the power to erase more than one or two previous winners. (Location 1665)

adjust risk in smaller increments, so the impacts of winners or losers does not have a strong effect on my overall performance. (Location 1670)

a trader must balance risk across all trades. If that final trade turns out to be a loser, it does not ruin your day or your psychological control over future trades. (Location 1678)

The fear of making the loss real keeps you in the trade: it makes you think about finding a way to turn the trade around instead of just acknowledging that it’s a losing trade, taking the loss, and moving on to the next trade. (Location 1692)

The second-most-important skill for new traders to learn is to cap their losses. The most-important skill is to create and follow their trading plan, regardless of emotions at the moment. (Location 1702)

If you enter a trade that has a good profit potential and it fits into your trading strategy, the last thing you should want to do is sell that trade before it has had a chance to work. (Location 1704)

We must learn to do the exact opposite: cap our losers and let our winners run. (Location 1711)

Quit by Annie Duke. (Location 1714)

as traders move from beginner, to intermediate, and then to advanced, a critical skill they need to learn is how to throttle up in a hot market trading session and throttle down in a cold market trading session. (Location 1737)

my best days tend to be clustered together. This is because the overall market is hot, and not just one stock. (Location 1739)

I trade the market I’m in, not the market I want to be in. I throttle up when it’s hot, throttle down when it’s cold, and do everything possible to minimize drawdown so that each day I come to the table confident and ready to perform at my best. (Location 1743)

“scaling out” of a position. Rather than selling the full position when your profit target is hit, you choose to sell half and keep the rest. (Location 1763)

The more I see stocks failing to exceed my profit target, the more likely I’ll be to sell sooner. On the other hand, when I repeatedly see stocks outperforming my price targets, I’ll start to hold longer. (Location 1772)

Being able to adjust your strategy in real-time is the goal for any trader. This requires a deep connection both with the market and your awareness of your own emotional state. This is what we call “flow state” trading. (Location 1777)

As a beginner, it’s super important to protect your emotional state. That state is similar to momentum: (Location 1788)

Once a beginner trader has recovered successfully from their first drawdown, they are ready to work on trading longer when the market is hot. (Location 1794)

my biggest losses were spontaneous trades I jumped into on an impulse. (Location 1807)

“trader rehab” which is not a physical place, but a state of mind where I return to strict guardrails. (Location 1815)

In order to prevent an extended period of decline, I keep those guardrails firmly in place until I’ve recouped about half of the drawdown. (Location 1830)

The real Holy Grail is to have self-awareness of stress, and the discipline to follow your rules, regardless of momentary urges. (Location 1845)

A stock chart is a visual representation of the price history of a stock. (Location 1857)

I set up my monitors to show daily, five-minute, and one-minute charts. I even have a ten-second chart for when stocks are moving really quickly. (Location 1865)

the thin lines that go up to the high, and down to the low, are called the upper and lower “candle wicks,” “wicks,” or “shadows.” (Location 1876)

Sometimes a doji will also have a long upper or lower candle wick. The price suddenly moved up or down, but quickly returned to the same price as the open. This means the move was not sustained. (Location 1891)

In general, doji candles represent some indecision in the market. (Location 1893)

the human brain is great at recognizing complex patterns, if given time to see them again and again. (Location 1902)

When you see candles with super-long upper or lower wicks, these are called “topping tail” or “bottoming tail” candles. These candles can signify a potential reversal. (Location 1907)

the hammer candlestick really only has significance when it happens in the context of a long downtrend. (Location 1916)

Confirmation of the reversal will come when the next candle breaks the high of the hammer. This is called a “candle-over-candle” confirmation. (Location 1923)

As day traders, we always want to be holding a stock while a long body candle— and the bullish sentiment— is forming. But we must be cautious when considering buying after a long body candle. If we do buy at the top of a long body candle, we’re chasing a large move. It’s usually better if we wait for a pullback opportunity if we want to trade with the trend. (Location 1933)

After a series of several long body candles in a row, there is a high likelihood of a bounce or change in sentiment. (Location 1938)

I’ve found that trading the right stock is much more important than trading the right pattern. (Location 1978)

“buy low and sell high.” That’s not a momentum day trading strategy. Instead, we buy high and sell higher. (Location 1992)

Scaling down share size as a stock moves higher is a way of reducing risk while continuing to capitalize on the momentum. (Location 1995)

I will keep buying and selling higher until I reach my first loss, where the stock did not go higher. (Location 1997)

Each day when I sit down and am looking at potential stocks to trade, I ask myself: Is this the strongest stock today? (Location 2002)

today’s strongest, most volatile stock gets flashed across the screens of traders worldwide. (Location 2006)

When a stock is a buyout, the value becomes fixed at the buyout price and volatility disappears. (Location 2010)

In periods of market lethargy, scale back your expectations for making great trades, or even for making any trades. (Location 2014)

FOMO, or Fear Of Missing Out, is a huge driver of stock volatility. (Location 2017)

If I emotionally smash the buy button thinking only about potential profit, it is a form of emotional hijack. (Location 2021)

if I give back approximately 10-15 percent of my profit on the day, I shut it down before I give back more. If I find myself in a position where it appears that I bought too high, I ruthlessly cut my loss. (Location 2028)

You can think of greed in the market as one-day-old FOMO. (Location 2030)

Sometimes when one stock is strong, I’ll see three or four others start to pick up. I call it sympathy momentum. (Location 2037)

My goal each day is to pull ten to fifteen cents per share out of the market. (Location 2046)

If you can do just ten cents per share per day consistently, that’s something you can scale. (Location 2049)

most seasoned traders do not take a full dollar per share out of the market per day. For most, it’s probably anywhere from 15 to 25 cents. On a good day it will be 50 cents and on an amazing day it will be a dollar or more. (Location 2062)

The higher the relative volume, the better. That’s because it indicates a sudden interest in the stock, which typically results from some catalyst. (Location 2086)

once a stock has been the focus of that mentality, it establishes something of a reputation. (Location 2089)

I have a scanner that specifically filters stocks I consider former runners. I set the total volume filters lower on that stock, because when a former runner starts to move, I want to make sure I see it quickly. (Location 2093)

I look not only for the strongest stock today, but I also ask myself: Is this the obvious one? (Location 2101)

If you had to talk yourself into trading the stock, it won’t be any more obvious to all the other traders, and it’s not worth trading. Better to wait for something else to happen during this trading session, or wait for a new day. (Location 2103)

In retrospect, my goal should have been that I would be ready to trade when I had proven that I was ready; not when I merely thought it was time. (Location 2116)

it took me a while to realize that breakeven is an accomplishment. Only after I identified my winning strategies and stopped the losing strategies, did I begin to see consistent progress. (Location 2142)

I keep a trading journal, and update it after each trading day. (Location 2148)

It needs to become a quick habit, while the trades are fresh in your mind and while the “notes” section will describe what you were thinking at the time. (Location 2157)

Bringing both positive and negative habits of your trading into your awareness is an important step in refining and improving a strategy. (Location 2162)

I regularly analyze my journal for clues about the conditions that generate green and red days for me. When I’m in a slump, I study my journal even more. (Location 2165)

In retrospect, I’ve realized that I could have saved a lot of effort and money by resisting the temptation to blaze a new trail. When I’m learning something new, I now follow what the professionals do as much as I possibly can. (Location 2197)

do not become discouraged by the amount you need to learn! You’re not in a race and besides, you probably have lots of skills, sports, hobbies, and other activities that are made up of many dozens of individual micro-skills. (Location 2213)

For each of the windows or screens that you’ll have open on your monitor, you must know what all the terms, numbers, chart lines, and patterns mean. (Location 2221)

A technical indicator is a ratio or other metric that may or may not put the current price of a stock in context, so the trader can decide whether to buy, hold, or sell. (Location 2223)

how to harness the power of advanced order-routing technology. (Location 2231)

Your trading plan will be a thorough document that spells out in specific detail how you intend to trade. (Location 2250)

The real test is to be green for a string of weeks. If you can do that for five or six weeks, something must be working in your profit/ loss ratio and accuracy. (Location 2273)

When starting out, I should have made just one trade per day until I could show five or six green weeks in a row. (Location 2279)

watch intently, study the patterns and data, and make that one trade be the best you can do today. It’s the shortest route to building confidence. (Location 2283)

It happens, and it needs to happen to you, so you can learn to handle it. (Location 2294)

be careful whom you tell about your real-money trading outcomes. Outsiders who don’t know the methodical process you’re following may give you the opposite of the support you need: (Location 2305)

keep the guardrails in view, execute on your trading plan, and review your journal. (Location 2309)

when you increase the number of trades, you’re statistically more likely to see one or more red trades, and that risks an emotional setback. (Location 2314)

slow, incremental increases while trading at the edge of your comfort zone, because you want to grow but not so fast that you risk wrecking your confidence. (Location 2316)

Continue this process until you’re making one trade of 1,000 or even 2,000 shares. When you’ve built your skills and confidence to do that with consistent profits, now’s the time to think about scaling up to two trades per day. (Location 2318)

It’s far more important to build confidence and skill than it is to build your profits. (Location 2321)

Profits are a byproduct of a disciplined trader with some experience and educated intuition following a proven trading plan. (Location 2322)

I’m looking at a key level to get to the trade. As soon as I am ready to take that trade, I focus all my energy on the Level 224 and the Time and Sales window25, because that’s going to show what’s going on. (Location 2423)

Anyone can learn a strategy, but most won’t have the mental strength to follow the rules of the strategy. (Location 2471)

It’s a good idea for everyone to find a way to be held accountable. Before I was teaching and mentoring, I didn’t have a friend with an interest in trading, so I paid someone to go over my trades with me once a week. (Location 2505)

losses are going to happen. It’s how you react to those losses that shows what your success is going to be. (Location 2603)

The absolute last thing that you want to do is trade out of desperation. (Location 2614)

enough to either wait for the setups, or to go in the sim for long enough, should not trade. (Location 2644)

Being disciplined can become a habit and it can become a way of life, but it doesn’t mean that it’s fun every day, or that it’s easy. (Location 2655)

The ability to look back at my trading profits through the sim was the biggest key to it, as well as talking through my thoughts and feelings. (Location 2685)

I would have sized down my Sim account to be closer to what I would have when trading with real money. (Location 2698)

measure performance in a sim not as much based on total dollars of profit, but on consistency of average cents per share that you’re pulling out of the market. (Location 2702)

trading has a limit to scalability and at some point, the amount that we make is not based on how much is in the account. It’s based on the particular opportunity in the market. (Location 2710)

you can’t control that you didn’t start a year earlier, but as soon as you make the commitment to learn trading, you should try to gain as much experience as you can. (Location 2739)

sticking to the simulator to be patient and learn a profitable strategy before going live. (Location 2791)

The difference between what you thought you want to pay and what you end up paying is called “slippage.” (Location 2838)

If you have a short bias, you prefer to trade as stocks drop. (Location 2842)

Catalyst. Some sort of event that results in above-average interest in a stock by traders and investors. (Location 2854)

The trading unit of commodities is the “futures contract,” which is a bet on what the commodity will be worth in the future. (Location 2859)

Direct access routing. This is a type of system that allows direct access to a market; in other words, not through a broker. This (Location 2871)

Direct access routing isn’t something that beginners need, but it will become useful after they’ve honed their skills over time. (Location 2873)

Flash crash. This is when the HFT or computer-based trading systems go haywire and create huge swings in the price of some stocks. (Location 2884)

Flushing. This means what it says: it’s when a stock suddenly drops in price with no warning. (Location 2889)

When a stock opens higher or lower than the previous day, it has gapped. (Location 2895)

Index. A portfolio that’s a calculated representation of a market as a whole, or a sector, or some other slice. (Location 2909)

When you have access to Level 2— which you do need as a day trader— you get to see much more detail. Not only do you see various exchanges that currently show quotes for a stock, but also what their specific quotes are, and for how many shares. (Location 2914)

Liquidity. It refers to how quickly a stock can be traded without affecting its price. (Location 2920)

Margin call. This is a demand by a broker that the trader put up more money as collateral, because of changes in the stock price. (Location 2925)

I stay away from large caps (and usually mid-cap stocks) because there is a ton of programmed trading in them. They are really tough to read because of the rules and triggers that computerized trading firms build into their algorithms. (Location 2930)

Market makers. These are traders who profit by providing liquidity to the rest of the market. They usually hold an inventory of shares in a stock, and will provide a bid and ask price for that stock. This is in contrast with exchanges, which provide bid and ask prices, but do not hold shares for their own account. (Location 2934)

By momentum, we mean the level of aggressiveness in the market. (Location 2937)

Options can be tempting to trade, but they are best avoided by beginners, who are much more likely to lose money than make money from them. (Location 2945)

Penny stock. Officially a stock whose cost per share is less than $ 5 is considered a penny stock. (Location 2949)

Revenge trading. This is a form of emotional hijacking. First a trader experiences a loss; the trader then tries to make up for the loss by taking increasingly risky trades. (Location 2956)

At the end of an uptrend, you typically see a loss of steam and volume, as well as lower highs before the market settles into a tight range. (Location 2959)

Round lot. When you buy or sell 100 shares, that is a round lot. (Location 2961)

Scaling. As in “scaling in” and “scaling out.” Entering or exiting a position gradually instead of all at once. Day traders use this as a method of reducing risk. It enables them to avoid trying to time the “perfect moment” to get in or out of a position. (Location 2964)

Shares outstanding. It is the sum of all shares currently held by all shareholders, even if some of those shares are restricted from being traded. (Location 2971)

SSR is turned on when a stock drops over 10 percent in price versus the previous day’s close. It was put in place to prevent a cascade of people (or computers) shorting a stock as it is going down, and therefore driving it further down by their short sales. (Location 2974)

If the stock continues to go higher, those short sellers will be forced by their brokers to execute buy orders. That action drives the stock even higher and is known as a short squeeze. (Location 2982)

For stocks that have lots of trading volume, the spread can be one penny or less. For thinly traded stocks, it can be many dollars. (Location 2985)

It’s not a bad idea to become familiar with one or more sectors and their trading patterns, so you can act quickly when news happens in that sector. (Location 2989)

Support. This is a perceived floor in prices, such that the stock regularly may approach this level but does not go below it. (Location 2993)

Thick market. This is the opposite of a thin market, and it’s where there are many buyers and sellers. It’s a congested situation, and sometimes is called a “stacked Level 2” or a “crowded stock.” (Location 2999)

Thin market. Also called narrow market, it’s where there are few buyers and sellers. It often involves large spreads between bid and ask prices, and high price volatility. It’s not a great market for day traders. (Location 3001)

Volatility. This term refers to the magnitude of swings in the price of a stock in a period. (Location 3005)