Introduction 1 About This Book 2 Foolish Assumptions 2 Icons Used in This Book 3 Where to Go from Here 3 Part 1: Getting Started With Day Trading 5 Chapter 1: So You Want to Be a Day Trader 7 Defining Day Trading: It's All in a Day's Work 8 Committing to Trading As a Business 11 Identifying the Personality Traits of Successful Day Traders 13 Seeing What Day Trading Is Not 15 Chapter 2: Introducing the Financial Markets 19 Having a Firm Grasp How Markets Work 20 Opening an Account and Placing an Order 24 Defining the Principles of Successful Day Trading 25 Understanding Risk and Return 27 Differentiating Trading, Investing, and Gambling 34 Managing the Risks of Day Trading 37 Chapter 3: Assets 101: Stocks, Bonds, Currencies, and Commodities 39 Grasping the Different Things to Trade 39 Defining a Good Day Trading Asset 40 Taking a Closer Look at Stocks 46 Examining Bonds 52 Cashing In with Currency 55 Considering Commodities and How They Trade 56 Chapter 4: Assets 102: ETFs, Cryptocurrency, Options, and Derivatives 59 Explaining Exchange-Traded Funds (ETFs) in Plain English 60 Getting Familiar with Cryptocurrency 64 Dealing in Derivatives 69 Comprehending Arbitrage and the Law of One Price 74 Chapter 5: Increasing Risk and Potential Return with Short Selling and Leverage 79 Understanding the Magic of Margin 80 The Switch-Up of Short Selling 84 Leveraging All Kinds of Accounts 87 Borrowing in Your Trading Business 91 Assessing Risks and Returns from Short Selling and Leverage 93 Chapter 6: Managing Your Money and Positions 95 Setting Your Earnings Expectations 96 Gaining Advantage with a Money-Management Plan 99 Examining Styles of Money Management 101 Seeing How Money Management Affects Your Return 106 Planning for Your Profits 108 Chapter 7: Planning Your Trades and Trading Your Plans 111 Starting to Plan Your Trades: Just the Basics, Please 112 Closing Out Your Position 122 Maxims and Cliches That Guide and Mislead Traders 123 Part 2: Developing Your Trading Strategy 129 Chapter 8: Picture This: Technical Analysis 131 Comparing Research Techniques Used in Day Trading 132 Using Technical Analysis 136 Reading the Charts 143 Considering Different Approaches to Technical Analysis 148 Avoiding Technical-Analysis Pitfalls 150 Chapter 9: Following Market Indicators and Tried-and-True Day Trading Strategies 153 Psyching Out the Markets 154 Taking the Temperature of the Market 156 Measuring Money Flows 163 Considering Information That Crops Up during the Trading Day 166 Identifying Anomalies and Traps 169 Chapter 10: Eliminating Emotion with Program Trading 173 Creating Your Own Trading Program 174 Programming, the Day Trading Way 175 Backtesting Once, Backtesting Twice 177 Building on Some Standard Strategies 177 Arbitraging for Fun and Profit 179 Scalping, the Dangerous Game 182 Understanding Risk Arbitrage and Its Tools 183 Examining Arbitrage Strategies 186 Being Aware of Those Pesky Transaction Costs 191 Chapter 11: Day Trading for Investors 193 Recognizing What Investors Can Glean from Traders 193 Applying Momentum 199 When an Investor Considers Trading 203 Chapter 12: Researching Research Services 205 Understanding the Trade of Trading 206 Getting the Research You Need 212 Doing Your Due Diligence 218 Chapter 13: Determining Your Profit and Your Profit Potential 223 Before You Trade: Testing Your System 223 During the Day: Tracking Your Trades 230 Setting up your spreadsheet 230 Pulling everything into a profit and loss statement 230 Keeping a trading diary 232 After You Trade: Calculating Overall Performance 233 Reviewing types of return 234 Calculating returns 234 Determining the risk to your return 239 Using benchmarks to evaluate your performance 241 Part 3: Day Trading, Incorporated 243 Chapter 14: Setting Up Your Day Trading Like a Business 245 Planning Your Trading Business 246 Setting Up Your Trading Laboratory 249 Getting Mobile with the Markets 252 Controlling Your Emotions 253 Chapter 15: Your Key Vendor: Your Broker 261 Choosing a Brokerage 261 Discussing Brokers for Day Traders 266 Being Aware of Brokerage Scams 273 Chapter 16: Regulation Right Now 275 Looking Back on the Road to Regulations 276 Reviewing the Regulators 277 Working with Brokers' Rules 284 Watching Out for Insider Trading 287 Preparing for Rule Changes in Crisis Conditions 289 Taking on Partners 290 Chapter 17: Taxes for Day Traders 291 Getting the Lay of the Land: What You Need to Know Based on What You Trade 292 Hiring a Tax Adviser 295 Doing Your Taxes Yourself 297 Identifying Income Categories You Need to Know 298 Tracking Your Investment Expenses 302 Top Secret Tax Information for IRS-Qualified Traders Only 307 Discussing Other Important Tax Info: Forms and Deadlines 308 Using Self-Directed IRAs 309 Part 4: The Part of Tens 311 Chapter 18: Ten Good Reasons to Day Trade 313 You Love Being Independent 313 You Want to Work Anywhere You Like 314 You're Comfortable with Technology 314 You Want to Eat What You Kill 315 You Love the Markets 315 You Have Market Experience 315 You've Studied Trading Systems and Know What Works for You 316 You're Decisive and Persistent 316 You Can Afford to Lose Money 317 You Have a Support System 318 Chapter 19: Ten (or So) Good Reasons to Avoid Day Trading 319 You Want to Discover Investing by Day Trading 320 You Love Fundamental Research 320 You're Short on Time and Capital 321 You Like Working As Part of a Group 321 You Can't Be Bothered with the Details of Running a Business 321 You Crave Excitement 322 You're Impulsive 322 You Love Going to the Casino 323 You Have Trouble Setting Boundaries 323 You Want to Get Rich Quick 324 The Guy on YouTube Said It Would Work 324 Chapter 20: Ten Common Day Trading Mistakes 325 Starting with Unrealistic Expectations 325 Beginning without a Business and Trading Plan 326 Ignoring Cash Management 327 Failing to Manage Risk 327 Not Committing the Time and Money to Do It Right 328 Chasing the Herd 328 Switching between Research Systems 329 Overtrading 329 Sticking Too Long with Losing Trades .330 Getting Too Emotionally Involved 330 Chapter 21: Ten Tested Money-Management Techniques 331 Taking Money off the Table 332 Using Stops 332 Applying Gann's 10 Percent Rule 332 Limiting Your Losses with the Fixed Fractional System 333 Increasing Returns with the Fixed-Ratio System 333 Following the Kelly Criterion Formula 334 Figuring the Amount to Trade with Optimal F 334 Measuring Risk and Sizing Trades with Monte Carlo Simulation 335 Taking a Risk with the Martingale System 335 Throwing It to the Fates 336 Appendix: Additional Resources For Day Traders 337 Index 343
