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Day Trade Online, 2nd Edition

Day Trade Online, 2nd Edition

Christopher A. Farrell

ISBN: 978-0-470-47555-3

Dec 2008

240 pages

Select type: E-Book



Day trading can be quite lucrative, but only if you know what you are doing. As Farrell points out: ""Trading for a living is hard. Trading for a living over the Internet is even harder. There are many challenges and obstacles that confront you. Venturing into this jungle unprepared is a recipe for disaster."" This straightforward guide provides the head start and heads up necessary to thrive as a day trader, covering everything from the dangers and pitfalls of trading online to an in-depth analysis of which trading techniques work and which don't. Day Trade Online, Second Edition presents inside information on the strategies of top trading firms, including the most secretive, misunderstood, and profitable function on Wall Street. Most importantly, you will learn to look at ten different stocks and pinpoint which one to trade, when, at what price, and why. With the right know-how, you will be able to apply this knowledge to every single stock that you screen.



Section I. NSThe World of the Day Trader.

Chapter 1. NSExploiting the Excesses of Capitalism.

The House Edge.

The Bid-Ask Spread.

Section II. NSIntroduction to Day Trading.

Chapter 2. NSTrading 101: Buying on Bad News and Selling on Good News.

The Mind-Set of an Online Day Trader.

A Buyer When the Market Needs Buyers.

Hit Singles, Not Home Runs.

Brokerage Commissions Can Destroy Profits.

Buy in on Fear, Sell in on Greed.

The Slow Execution.

Is the NYSE an Easier Market to Trade?

Section III. NSHow to Beat Wall Street at Its Own Game.

Chapter 3. NSExploiting Wall Street's Conflict of Interest: Market Orders versus Limit Orders.

Understanding Wall Street's Conflict Interest.

Price Makers versus Price Takers.

The Bargaining Process.

The Process of Price Negotiation: Market versus Limit.

The Limit Order.

Wall Street's Prey.

Prelude to the Bid-Ask Spread.

Chapter 4. NSThe Day Trader's Crystal Ball: Understanding the Bid-Ask Spread.

A Snapshot of a Moving Picture.

The Mechanics of Price Movement: Understanding What Makes a Stock Move Higher.

Example 1: The Quote—A Snapshot of a Moving Picture.

Example 2: The Market Order to Sell—Hitting the Bid.

Example 3: The Market Order to Buy—Lifting the Offer.

Example 4: The Limit Order to Buy—Bidding for Stock.

Day Orders vs Good-Until-Cancelled (GTC) Orders.

Example 5: The Limit Order to Sell—Offering Stock.

Haggling Over Nickels and Dimes.

Example 6: Moving the Stock Higher.

Chapter 5. NSThe Role of the Specialist on the New York Stock Exchange.

Using the Specialist System to Your Advantage.

What If There Was No NYSE Specialist?

Buyer of Last Resort.

Is the Profit the Specialist Makes Justified?

A License to Steal?

The Specialist's Limit Order Book.

Being on Both Sides of the Market.

Narrowing the Bid-Ask Spread.

Wide Spreads Protect the Specialist from Volatility.

Handling a Large Sell Order.

The Real Intentions of the Specialists.

Beware When the Specialist Takes the Other Side of Your Trade.

The Daytrader as a Shadow Specialist.

The NYSE's Fair Order Handling Rules.

Never Reveal Your Hand.

How Can You Determine Where the Specialist Lurks in the Stock?

Jockeying for Position.

How Do You Know Where You Stand in Line?

When in Doubt, Ask the NYSE Floor

Tipping the Odds in Your Favor.

Beware of the Specialist.

Section IV. NSIntroduction to Scalping the NYSE: Taking Food out of the Specialist's Mouth.

Chapter 6. NSThe Day Trader's Secret Weapon: Exploiting the Bid-Ask Spread.

How Can You Possibly Make any Money Trading Stocks That Don't Move?

The Role of the Scalper.

Scalper's Keys to Success.

Hit Singles, Not Home Runs.

Under The Radar.

Make Sure the Order is Routed to the NYSE Floor

Avoid the Glamour Stocks.

Exploiting the Bid-Ask Spread.

Finding the Trade's Sweet Spot.

Instant Replay.

Simplifying a Complex Process.

The Other Moving Parts to This Trade.

Trading Do's and Don't's.

Take a Quick Glance at the Specialist's Order Book.

A Bet with the House?

Is This Too Much Work for Only $100 In Gross Profits?

A Few Words on Risk.

Section V. NSTrading The Market's Momentum: How to Profit From Volatility.

Chapter 7. NSExploiting Market Volatility and Momentum: Strategies For Trading the NYSE's Most Volatile Stocks.

The Specialist and the Upper Hand.

Playing the Gap Open: A Strategy for Betting with the House.

Buying on Bad News.

Betting on the Specialist.

Joining the NYSE Specialist as a Buyer of Last Resort.

An Extreme Case of Buying on the Bid.

The Specialist Goosed the Market.

Riding on the Specialist's Back.

The Parameters of the Gap Opening Trade.

How to Tell If the Opening Trade Will Clear: The Specialist's Limit Order Book.

Sell before the Second Wave.

Trading Tick for Tick with the Market Indexes.

Why Limit Orders Don't Work in a Rally.

Riding the Wave of Momentum.

Using the S&P Futures to Gauge the Sustainability of a Rally.

The Lightning-Fast Market Upsurge: How Offers Vanish in the Vapor Trail.

Stock for Sale Becomes Scarce.

Introduction to the Nasdaq Market: The Role of the Market Makers.

The Stock Market of the Next Hundred Years.

The “Real” Day Trading Firms.

The SOES Bandits.

Tracking the Nasdaq Comp.

A Few Words on Short Selling.

Taking Food Out of the Market Makers' Mouths.

Two Methods for Day Trading Nasdaq Stocks.

The Apple Computer Trade.

Buying Strong Stocks on Pullbacks.

Opening the Stock Abnormally High.

The Dangers of Buying a Strong Stock on the Opening Trade.

Inflicting Heavy Damage on the Market Makers by Attacking their Vulnerability.

Making a Profit at the Expense of the Market Makers.

Chapter 8. NSThe Day Trader's Ticket to the Poorhouse: How I Managed to Lose $12,000 in Less Than 24 Hours.

The Pain of Missing a Trade

How Could the Stock Go Any Lower?

The Terrifying Feeling of Getting Caught in a Downdraft.

A Feeling of Irresistible Greed.

The Need to Break Even.

Buying the Stock for the Third Time.

Murphy's Law.

A Feeling of Devastation.

Abnormally Wide Bid-Ask Spreads.

Trading on Old Price Information.

The Dangers of Attempting to Short-Term Invest Instead of Trade.

Refusing to Cut My Losses.

Going Back into the Stock after Losing Money in It.

Buying Twice as Many Shares.

Choosing to Trade a Volatile Stock on the Afternoon before a Holiday Weekend.

Learning from the Mistake and Moving On.

Can the Quoted Market Always Be Trusted?

A Fool and His Money are Soon Parted.

Appendix A. NSThe Day Trader's Arsenal: Choosing and Using Online Brokers, Negotiating Trade Commissions, Real-Time Quote Systems and the Home Office.

Choosing an Online Broker.

Negotiate the Best Possible Commission Rate.

Make Sure that the Broker Can Route Directly to the NYSE.

Per Share versus Per Trade Commission Rates.

Setting Up at Least Two Accounts.

System Crashes and the Late Fill.

Customer Service, Back Office Problems, and Trade Discrepancies.

The Remedy: Keep Good Trading Records.

The Home Office and the Virtual Trading Floor.

Trading Equipment.

The Psychological Effects of Working from Home.

The Isolation Factor.

Appendix B. NSConsiderations for Trading for a Living: The Allocation of Trading Capital, Using Margin, and The Pattern Day Trader Rule.

The Allocation of Trading Capital.

Part-Time versus Full-Time.

What Is the Pattern Day Trader Rule?

Trading on Margin.

The Margin Call.

The Pros and Cons of Trading Part-Time.