Introduction to Day Trading

Each trading day, millions of people sit down in front of computer screens to watch their favorite stocks pulse like human hearts. Many just want to see how their portfolio is fairing while others make or lose money by the keystroke as professional traders. Sandy is one of those trying to make the move from unemployed broker to day trader.

She spent thousands of dollars on books, wasted (in her words) nearly $5,000 attending a trading school, and even paid for two day traders to divulge their secrets. She picked the Ultra QQQ ProShares (QLD) as her security of choice to trade each day—an exchange-traded fund (ETF) designed to move twice as far as the Nasdaq 100 index. She liked the volatility that the fund provided.

With seed money from her last job and a spouse who worked full time, she started placing small bets over three months to learn the ropes. She made upward of 40 trades per day (a sign of overtrading), and almost broke even at days’ end—until adding in commissions and fees. Her trading account was down only 8 percent at the end of those three months. That is good for a beginner.

An hour into the trading session, she called to talk about her progress. “I’m down a little bit today.” She went long, but price reversed and headed south. Did she sell? “No. I bought more.” At what she hoped was the bottom, she doubled her position (doubled down), controlling stock worth more than $72,000 with just $3,600, due to the 20 to 1 leverage afforded ...

Get Swing and Day Trading: Evolution of a Trader now with the O’Reilly learning platform.

O’Reilly members experience live online training, plus books, videos, and digital content from nearly 200 publishers.