10 Golden Rules of Trading explained by former floor trader, retired hedge manager and President of INO.com, Adam Hewison.
Introduction
The greatest thing about virtual trading is that you cannot loose any money. It is a good place to develop and practice your trading skills and master your craft. To do so tips are very useful. Compare the 10 Golden Trading Rules in the video above with the tips shared in this blog and make your choice based on your style or method of trading.
Recently, there are a few people who have influenced me and made a lasting impact. They include: Nick Vujicic – Life without Limbs; Brian Tracy – Personal Development; and Mr. Burns – one of the most skillful virtual day trader on howthemarketworks.com. In this article, I will share some trading secrets to help new traders. The information will also help the experienced trader to step up his/her trading to another level.
Long Term Investors vs. Day Traders/Scalpers
Long term investors can’t compete with Mr. Burns. Mr. Burns is an exceptionally highly skilled day trader, paper trading on howthemarketworks.com. He can trade the same stock an investor has in his portfolio and Mr. Burns will take out profits and exit while the investor is waiting for the stock to accumulate more profit. With his increased capital (initial capital + profit) Mr. Burns will make even more money shorting the same stock on the down side while the investor is still waiting for the stock to rebound .
A swing trader does not have a chance either. He will get the same treatment if or when he holds his position for a day or more.
Day Traders/Scalpers
A day trader has a chance to compete with Mr. Burns. A day trader holds his positions for less than a day and if skilled, may be able to compete. However, I believe that Mr. Burns has the uncanny ability to detect when a stock is going to gap up or gap down and he enters his trades before the events occur. Therefore, making huge profits in a short period of time.
Then, there is another group of traders that howthemarketworks.com does not account for. These traders are called 'scalpers'. I believe that Mr. Barns is an extremely advance scalper/day trader. On the site, he has two portfolios of which he is in first place in each portfolio. He also trades a few days in each portfolio and then rides off into the sunset, may be playing golf or making real money.
I can be categorized as a scalper. But, I refer to myself as a 'Momentum Minute Trader' tm. I trade from 1 – 25+ minutes per trade. I work full-time, so my time to trade is very limited. However, Mr. Burns by his performance has inspired me to step up my trading and I made huge profits in one day virtually trading one stock. I hope that every trader who reads this article will refer to themselves from now on as a 'money making trader' instead of a long term investor, a value investor, a swing trader or a day trader etc. Meaning, that they will become whatever trader that is necessary that will help them make money.
For new traders to increase their profits; and for experienced traders to step up their trading they need to implement the following tips. These may give them an opportunity to compete with Mr. Burns; but most importantly, make them better traders.
Trading Tips 1 - 5
Tip 1. Every trader must have a trading plan and task/strategies to implement in order to accomplish their goals.
Tip 2. A day trader/scalper has the best opportunity to make serious money in this market environment. However, stock market trading can be highly risky. A trader must be proficient in shorting. In shorting, you could make just as much or more as in buying long.
Tip 3. Trade the lower-priced stocks with large 90-day average volume, 500,000 or more. Buy long or sell short the maximum amount of shares as per your available balance. This will give you the biggest bang for your buck and avoids slippage when you enter and exit a trade. However, in comparing two stocks look at the increment on each chart. Let’s say one chart shows $5.21, 5.22, 5.23 etc.; and the other chart shows $7.71, 7.81, 7.91 etc.; then you are better off trading the $7.71 stock. To simulate real trading stay within the commission/volume range of your brokerage account.
Tip 4. Trade the most volatile stocks with the largest price ranges. This gives you an opportunity to make a lot of money quickly, your potential to loose also increases. Disregard news, stock tips, fundamentals etc. Just focus on the stock charts. Charts reveal all you need to know about a stock in order to make money. Could you imagine traders chatting about AAPl, $457 and GOOG, $754? I traded virtually KERX, $8.49 a few days ago and made huge one day profits when my portfolio balance was about $50,000. I traded virtually RIMM, $13.78 for part of the day and made very large profits also – need I say more?
Tip 5. Become a pro by practicing and know the movement of Exchange-Traded Funds, ETF’s. Some ETF’s goes up when the market goes up and goes down while the market is going down; example: XIV. Other Contra-ETF’s goes up during the time the market is going down and goes down when the market goes up; example UVXY.
Continued on Part II...
Caution
According to the Federal Trade Commission, 'How-To' Products Promise Extravagant Profits, Few Risks, While North American Securities Administrators Association Says 70% of Day Traders Lose Money. Please visit the FTC at the link above. The information provided on this site is for educational purposes only and does not give trading, investment, tax, or legal advice. The information presented here is not specific to any individual's personal circumstances. Because of the nature of financial leverage and the rapid returns that are possible, day trading can be either extremely profitable or extremely unprofitable, and high-risk profile traders can generate either huge percentage returns or huge percentage losses. Anyone who chooses to use the information here in real trading does so at their own risk and will be responsible for their gains as well as their losses.
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