book

Day Trading For Dummies, 4th Edition

by Ann C. Logue

April 2019

Beginner

368 pages

10h 17m

English

For Dummies

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About This BookFoolish AssumptionsIcons Used in This BookWhere to Go from Here
Defining Day Trading: It’s All in a Day’s WorkCommitting to Trading As a BusinessIdentifying the Personality Traits of Successful Day TradersSeeing What Day Trading Is Not
Having a Firm Grasp How Markets WorkOpening an Account and Placing an OrderDefining the Principles of Successful Day TradingUnderstanding Risk and ReturnDifferentiating Trading, Investing, and GamblingManaging the Risks of Day Trading
Grasping the Different Things to TradeDefining a Good Day Trading AssetTaking a Closer Look at StocksExamining BondsCashing In with CurrencyConsidering Commodities and How They Trade
Explaining Exchange-Traded Funds (ETFs) in Plain EnglishGetting Familiar with CryptocurrencyDealing in DerivativesComprehending Arbitrage and the Law of One Price
Understanding the Magic of MarginThe Switch-Up of Short SellingLeveraging All Kinds of AccountsBorrowing in Your Trading BusinessAssessing Risks and Returns from Short Selling and Leverage
Setting Your Earnings ExpectationsGaining Advantage with a Money-Management PlanExamining Styles of Money ManagementSeeing How Money Management Affects Your ReturnPlanning for Your Profits
Starting to Plan Your Trades: Just the Basics, PleaseClosing Out Your PositionMaxims and Clichés That Guide and Mislead Traders

Comparing Research Techniques Used in Day TradingUsing Technical AnalysisReading the ChartsConsidering Different Approaches to Technical AnalysisAvoiding Technical-Analysis Pitfalls
Psyching Out the MarketsTaking the Temperature of the MarketMeasuring Money FlowsConsidering Information That Crops Up during the Trading DayIdentifying Anomalies and Traps
Creating Your Own Trading ProgramProgramming, the Day Trading WayBacktesting Once, Backtesting TwiceBuilding on Some Standard StrategiesArbitraging for Fun … and ProfitScalping, the Dangerous GameUnderstanding Risk Arbitrage and Its ToolsExamining Arbitrage StrategiesBeing Aware of Those Pesky Transaction Costs
Recognizing What Investors Can Glean from TradersApplying MomentumWhen an Investor Considers Trading
Understanding the Trade of TradingGetting the Research You NeedDoing Your Due Diligence
Before You Trade: Testing Your SystemDuring the Day: Tracking Your TradesAfter You Trade: Calculating Overall Performance
Planning Your Trading BusinessSetting Up Your Trading LaboratoryGetting Mobile with the MarketsControlling Your Emotions
Choosing a BrokerageDiscussing Brokers for Day TradersBeing Aware of Brokerage Scams
Looking Back on the Road to RegulationsReviewing the RegulatorsWorking with Brokers’ RulesWatching Out for Insider TradingPreparing for Rule Changes in Crisis ConditionsTaking on Partners
Getting the Lay of the Land: What You Need to Know Based on What You TradeHiring a Tax AdviserDoing Your Taxes YourselfIdentifying Income Categories You Need to KnowTracking Your Investment ExpensesTop Secret Tax Information for IRS-Qualified Traders OnlyDiscussing Other Important Tax Info: Forms and DeadlinesUsing Self-Directed IRAs
You Love Being IndependentYou Want to Work Anywhere You LikeYou’re Comfortable with TechnologyYou Want to Eat What You KillYou Love the MarketsYou Have Market ExperienceYou’ve Studied Trading Systems and Know What Works for YouYou’re Decisive and PersistentYou Can Afford to Lose MoneyYou Have a Support System
You Want to Discover Investing by Day TradingYou Love Fundamental ResearchYou’re Short on Time and CapitalYou Like Working As Part of a GroupYou Can’t Be Bothered with the Details of Running a BusinessYou Crave ExcitementYou’re ImpulsiveYou Love Going to the CasinoYou Have Trouble Setting BoundariesYou Want to Get Rich QuickThe Guy on YouTube Said It Would Work
Starting with Unrealistic ExpectationsBeginning without a Business and Trading PlanIgnoring Cash ManagementFailing to Manage RiskNot Committing the Time and Money to Do It RightChasing the HerdSwitching between Research SystemsOvertradingSticking Too Long with Losing TradesGetting Too Emotionally Involved
Taking Money off the TableUsing StopsApplying Gann’s 10 Percent RuleLimiting Your Losses with the Fixed Fractional SystemIncreasing Returns with the Fixed-Ratio SystemFollowing the Kelly Criterion FormulaFiguring the Amount to Trade with Optimal FMeasuring Risk and Sizing Trades with Monte Carlo SimulationTaking a Risk with the Martingale SystemThrowing It to the Fates
Great Books for Great TradingThe Trader’s InternetOther Mainstream Media

Content preview from Day Trading For Dummies, 4th Edition

Chapter 9

Following Market Indicators and Tried-and-True Day Trading Strategies

IN THIS CHAPTER

Studying the psychology and moods of the market

Following the flow of funds

Knowing what to look for during the trading day

Avoiding dangerous situations

Looking at strategies that many day traders use

Day traders put their research to work through a range of different strategies. All strategies have two things in common: They’re designed to make money, and they’re designed to work in a single day. And the best ones help traders cut through the psychology of the market.

In this day and age, most trading takes place via computers. Of course, human beings often direct the trading, but the machines are doing the work. Short-term profit potentials can be very small. As much as they want to be dispassionate, human traders get sucked into hope, fear, and greed — the three emotions that ruin people every day. To complicate matters, many markets, such as options and futures, are zero-sum markets, ...