THE COMPLETE GUIDE TO DAY TRADING - Rockwell Trading
[Pages:273]THE COMPLETE GUIDE TO DAY
TRADING
A Practical Manual From A Professional Day Trading Coach
Markus Heitkoetter
The opinions expressed in this manuscript are solely the opinions of the author and do not represent the opinions or thoughts of the publisher. The author represents and warrants that s/he either owns or has the legal right to publish all material in this book.
The Complete Guide to Day Trading A Practical Manual From A Professional Day Trading Coach All Rights Reserved. Copyright ? 2008 Markus Heitkoetter V1.0
Edited by Nicole Quinlan
This book may not be reproduced, transmitted, or stored in whole or in part by any means, including graphic, electronic, or mechanical without the express written consent of the publisher except in the case of brief quotations embodied in critical articles and reviews.
ISBN: 978-1-4196-9563-6
PRINTED IN THE UNITED STATES OF AMERICA
To my family for supporting me even in my craziest moments.
Table of Contents
PREFACE......................................................................................................... VIII INTRODUCTION: WHY DAY TRADING?................................................................... XI HOW TO GET THE MOST OUT OF THIS BOOK.....................................................XVII
PART 1: DAY TRADING BASICS ? WHAT YOU SHOULD KNOW ......................... 1
WHAT IS DAY TRADING?.......................................................................................2 WHO SHOULD BE DAY TRADING?.......................................................................... 4 IS IT REALLY POSSIBLE TO MAKE A LIVING AS A DAY TRADER?................................8 HOW TO GET STARTED - DEFINE YOUR GOALS AND MAKE A PLAN.......................... 15
1.) Define Your SMART Goal................................................................... 16 2.) Make a Plan........................................................................................ 17 3.) Execute the Plan..................................................................................18 HOW MUCH MONEY DO YOU NEED TO GET STARTED?.......................................... 21 DETERMINING YOUR RISK TOLERANCE.................................................................. 24 WHAT YOU NEED TO BEGIN TRADING...................................................................26 A Computer................................................................................................26 An Internet Connection ............................................................................. 27 A Charting Software .................................................................................. 27 A Broker.....................................................................................................36 A Properly Funded Trading Account .........................................................39 A Trading Strategy.....................................................................................40
PART 2: YOUR TRADING STRATEGY ? THE CORNERSTONE TO YOUR TRADING SUCCESS .......................... 43
HOW TO DEVELOP YOUR OWN PROFITABLE DAY TRADING STRATEGY....................... 44 STEP 1: SELECTING A MARKET............................................................................. 45
Trading Stocks........................................................................................... 46 Trading Forex............................................................................................51 Trading Futures......................................................................................... 59
Trading Stock Options............................................................................... 74 STEP 2: SELECTING A TIMEFRAME......................................................................... 78 STEP 3: SELECTING A TRADING APPROACH.............................................................80
Fundamental Analysis............................................................................... 80 Technical Analysis..................................................................................... 83 Day Trading Charts...................................................................................86 Technical Indicators .................................................................................. 96 Popular Trading Approaches .................................................................. 128
STEP 4: DEFINING ENTRY POINTS....................................................................... 141 STEP 5: DEFINING EXIT POINTS.......................................................................... 142
Stop Losses.............................................................................................. 143 Profit-Taking Exits...................................................................................151 Trailing Stops.......................................................................................... 158 Taking Partial Profits.............................................................................. 160 Time-Stops............................................................................................... 160 STEP 6: EVALUATING YOUR STRATEGY................................................................ 162 How to Read and Understand a Performance Report ............................ 167 STEP 7: IMPROVING YOUR STRATEGY.................................................................. 173 THE 10 POWER PRINCIPLES ? MAKING SURE THAT YOUR TRADING PLAN WORKS. . .181 Principle #1: Use Few Rules ? Make It Easy to Understand ..................182
Principle #2: Trade Electronic and Liquid Markets ............................... 183 Principle #3: Have Realistic Expectations ..............................................183 Principle #4: Maintain a Healthy Balance Between Risk and Re ward...184
Principle #5: Find a System That Produces at Least Five Trades per Week ................................................................................................................. 185 Principle #6: Start Small ? Grow Big..................................................... 185 Principle #7: Automate Your Exits .......................................................... 187 Principle #8: Have a High Percentage of Winning Trades ..................... 188 Principle #9: Test Your Strategy on at Least 200 Trades ........................ 188 Principle #10: Choose a Valid Back-Testing Period ...............................189
PART 3: THE SECRETS TO DAY TRADING SUCCESS.........................................192
THERE'S MORE TO TRADING THAN JUST HAVING A STRATEGY...............................193 THE SEVEN MISTAKES OF TRADERS AND HOW TO AVOID THEM.............................. 197
Mistake #1: Struggling To Identify the Direction of the Market ............. 200 Mistake #2: Not Taking Profits ................................................................201 Mistake #3: Not Limiting Your Losses .....................................................202 Mistake #4: Trading the Wrong Market .................................................. 203 Mistake #5: Lack of a Trading Strategy .................................................. 204 Mistake #6: Not Controlling Your Emotions ........................................... 205 Mistake #7: Overtrading......................................................................... 206 THE TRADER'S PSYCHE..................................................................................... 208 THE THREE "SECRETS" TO DAY TRADING SUCCESS...............................................214 THE TENETS OF DAY TRADING........................................................................... 217 HOW TO START TRADING WITHOUT RISKING A SINGLE PENNY............................... 221
BONUS MATERIALS.................................................................................... 226
APPENDICES..................................................................................................227 APPENDIX A ? TRADING PLAN TEMPLATE............................................................ 228
V
APPENDIX B ? BROKER CHECKLIST.......................................................................................... 231 APPENDIX C ? ADDITIONAL RESOURCES....................................................................................232 APPENDIX D ? READING RESOURCES...................................................................234 APPENDIX E ? GLOSSARY.................................................................................. 238 APPENDIX F ? ABOUT MARKUS HEITKOETTER...........................................................................252 APPENDIX G ? COACHING PROGRAMS....................................................................................... 254
Preface
D ay trading can be simple, but don't make the mistake of think ing that it's easy.
I know that there are many websites and late-night infomercials that try to tell you differently. They make you think that you just have to read a few pages or attend an online class, and then, magically, you'll become a successful trader.
Don't be fooled.
Like in any other profession, you need a solid education before you get started. After all, the goal is to make more money than a lawyer or a doctor, but many aspiring traders expect to learn everything they need to know from an eBook that they might get somewhere on the Internet, most likely for free. And how could a small amount of free information teach you to make more money than people who have gone to school for years and years?
Right, the answer is: it can't.
Some aspiring traders think they don't have to learn a single thing. They believe that they can buy a "magic system" or "XXX software" that will place their trades for them and make them rich while they sleep. Or they rely on the advice of some "guru" for their trading decisions, blindly following his recommendations without knowing anything about the markets.
I'm glad you're different.
VIII
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