THE COMPLETE GUIDE TO DAY TRADING - Rockwell Trading

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

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