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Day Trading - Don't get Greedy!
from: steve loughlinSince I publish the trader's site: www.BanzaiDaddy.com, I'm
always getting friends trying to get that 'golden nugget' of
information from the horse's mouth ( that would be me -
sometimes it's a different end ).
More than questions, I get the statements : "Man, if I had your
information and trading knowledge - I could make a 'killing' in
the market!" or "Why settle for a little each day, when you
could Really clean up?"
My answer ? Don't get Greedy !
Once you start trading, it's easy to find yourself in this
destructive pattern...
As a beginner, you start out just wanting an extra $100 a day -
maybe an extra $ 300 a week. You get lucky. Fantastic trades
seem to come easy - too easy. Now that $100 a day is bumped up
to $300 a day and that weekly goal gets pushed up to $1,000.
You start to let the dollars get in the way of common sense. You
figure if it's this easy to make money trading - maybe I'll
increase the amount of contracts or the number of shares I trade.
Suddenly instead of trading 500 shares, you're trading 1,000.
Instead of sticking with one or two contracts on the emini,
you're punching in five or ten contracts!
You figure, what the heck...this is like taking candy from a six
year old!
Then one day, after weeks of endless wins - the real world hits
you in the face.
That 10 contract trade on the Mini Russell all of a sudden
starts to turn against you. You stare at the screen in
disbelief... This can't be happening! I've been trading this
technical pattern for three weeks without one losing trade!
In your cockiness, you've stopped using stop loss orders and now
your trade is dropping - and Fast! You just 'know' it's going to
turn around any minute. You also know that with the Mini Russell
each point per contract equals $100. You're trading 10 contracts
( because that's the way to make the Big Bucks - right?). That
means for 'every tick' - you're either making or losing $100 !
You hold and hold and hold...Seconds go by like hours. You're
frozen. Common sense tells you to 'bail'. That greedy little
voice in the back of your mind tells you to keep watching.
When your pain threshold reaches the limit, you hit the panic
button and place a market order to dump everything! Now!
You've managed to make $4,000 in the past few weeks and in one
fell swoop you've just lost $5,000 ! And hopefully you've
learned a lesson - Don't get Greedy.
Trading large 'can' make you a lot of money. It can also take it
faster than you made it.
Since I trade the eminis, let me give you an example of trading
just 'one' contract at a time.
We'll assume you will trade five days a week - 50 weeks a year.
Holidays won't be taken into consideration...We'll also use Five
(5) points a day as our target and no commission will be figured.
Trade the S&P 500 emini and you'll make: $250 / day $1,250 /
week $5,000 / month $ 60,000 / year
Trade the Mini Dow and you'll make: $ 250 / day $ 1,250 / week $
5,000 / month $ 60,000 / year
Trade the Mini Russell and you'll make: $ 500 / day $ 2,500 /
week $ 10,000 / month $ 120,000 / year
Trade the Mini Nasdaq and you'll make: $ 100 / day $ 500 / week
$ 2,000 / month $ 24,000 / year
On most trading days, you can easily do this in the first two
hours of trading - since that's when most of the action occurs.
So the question is: How much money do you want from two hours of
work - average?
If you really want to get grounded, ask yourself what you'd make
working two hours in a 'normal' job?
Above all, use common sense when trading and don't trade 'over
your head'. Small, consistent profits over the long haul will
win out any day.
About the author:
Steve Loughlin is a trader and publisher of the Trading
Website:
target="_blank">www.BanzaiDaddy.com Let BanzaiDaddy.com be
your online source for all your trading needs and education.
Learn to trade well -
the money will follow!
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