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Thursday, August 18, 2005
Market Recap
Not much of anything has changed since our report last night. The indices traded in a limited trading range today with low volatility and low volume. The DOW gained 4 points, the S&P lost 1 point and the NASDAQ lagged with a 9 point loss. The good news is all three indices closed above their respective 50 SMA's and the fact that they remain above these key averages means that the market is fighting to hang on and stay in a bullish trend. Tomorrow is options expiration so volume may pick up a little but it will probably not be heavy. I suspect that we will continue to see low volume days next week as well since it is the last week of August.
Day Trading Capital
“How much capital will I need to start day trading for a living?” This is a very common question that we often receive and it is somewhat difficult to answer. That is because each individual is different and has a different set of goals Each persons standard of living could be different and what one individual makes with day trading for a living may not be enough for another. The more money you want or need to make will depend on the amount of capital that you have at risk.
Swing Trade for Percentage, Day Trade for Dollars
The only answer is that it is different for each person and it is something you must consider for yourself before you start. We can only give some practical guidelines. I personally feel that you should have enough trading capital to purchase between 500 to 1000 shares of any given stock, without having to use margin. When I swing trade, I look for gains in percentage points however, when I day trade, I am looking for dollars to take out of the market that day. I need a dollar figure because this is my salary for my work, it is how I make my living so I want to make a certain amount of dollars when I day trade. I buy more expensive stocks when I day trade and I normally buy either 500 or 1000 shares, depending on the price of the stock. Ideally, my target when I take a day trade position is a $1.00 move on the stock. If I get the move, I will run a trailing stop behind the price to lock in the profit, if the stock should fall back on me. I use the trailing stop because I want to take advantage of any more up movement that the stock might have. If I were to just sell at the $1.00 target, I am only robbing myself of possible further upside in the stock and limiting my potential profit. Remember, when you are trading 1000 shares at a time, you only need a small move in the stock for a worthwhile profit.
Keep Expectations Realistic
If you trade stocks in the $30 to $60 range, this could mean that you need a minimum of $30,000 to start. 1000 shares of a $30 stock or 500 shares of a $60 stock and so on. This of course would be 100% of your capital in any one position, which is very dangerous. If you want to trade 2 or 3 positions at a time, you would need $60K to $90K to start, assuming that you trade the 500 to 1000 share blocks. Of course you do not need to trade that many shares, however, keep in mind, with lesser shares traded, you will need bigger daily moves in the stocks to make a decent living and there are times when stocks just do not swing more than $1.00 in a day on flat days. Just remember, if you are starting small, keep your expectations realistic. Certainly, someone trading with $30,000 to $50,000 is going to have a much more difficult time generating $1,000 per day than someone using $100,000 or more. Know your limitations with respect to your capital. Keep things in perspective and try not to expect miracles.
When you get into the bigger leagues of day trading, you can then take on (purchase or short) a block or two of a stock, generally defined as 10,000 shares. You can trade 10K shares of a $5.00 stock for only a 10 cent move and you will have profited $1,000 in that trade. This type of trading would require more capital because I for one would not risk all of my capital on a cheap $5.00 stock. This is going to require $300,000 or more of trading capital plus some use of margin in limited situations and for a limited time. When you reach this level, it is easy to see how day trading can become quite profitable and quite risky. A move of a few pennies across 10,000 shares can return quite a bit of money, quite rapidly if you scalp 3 or 4 swings a day. Just remember it goes both ways; you can quickly lose quite a bit as well. There is no right or wrong answer with regard to how much you need to start. Simply keep your objectives in perspective and be realistic based on the capital in play.
STHQ Chart Index
If you go to the chart index in the left side menu, you can review and study charts that we have annotated for each stock listed in the past.
For New Members
For all of the new members with us, please make sure to read the link “How to use Bulletin” at the bottom of the Bulletin page on the website. It is critical that you know how to use this trading tool before trying to trade the stocks mentioned. The effectiveness of your trades will diminish if you do not completely understand how the information is presented.
Earnings Calendar
We have added the earnings link for each stock on the bulletin. To access the link for earnings, you can either use the link below or click the link on the bulletin for the corresponding ticker. Click the online bulletin in the left side menu for access to the earning calendar for each stock listed. It is not recommended to hold a position through earnings. You can always buy the stock back after the dust settles.
http://www.earnings.com
Stockcharts Listing
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http://stockcharts.com/def/servlet/Favorites.CServ...
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