Strategies for the Online Day Trader

399 Pages·1999·4.05 MB·English

by  Fernando Gonzalez

Strategies for the Online Day Trader :
title: Advanced Trading Techniques for Online
Profits
author: Gonzalez, Fernando.; Rhee, William.
publisher: McGraw-Hill Professional
isbn10 | asin: 0071351531
print isbn13: 9780071351539
ebook isbn13: 9780071367950
language: English
Electronic trading of securities, Stocks--
subject
Data processing.
publication date: 1999
lcc: HG4515.95.G66 1999eb
ddc: 332.63/2/0285
Electronic trading of securities, Stocks--
subject:
Data processing.
Page iii
Strategies for the Online Day Trader
Advanced Trading Techniques for Online Profits
Fernando Gonzalez
William Rhee
McGraw-Hill
New York San Francisco Washington,
D.C. Auckland Bogotá Caracas Lisbon
London Madrid Mexico City Milan Montreal New Delhi San Juan
Singapore Sydney Tokyo Toronto
Page iv
Library of Congress Cataloging-in-Publication Data
Gonzalez, Fernando
Strategies for the online day trader : trading techniques for
online profits / by Fernando Gonzalez and William Rhee.
p. cm.
ISBN 0-07-135153-1
1. Electronic trading of securities. 2. StocksData processing.
I. Rhee, William. II. Title.
HG4515.95.G66 1999
332.63'2'0285dc21 99-
15644
CIP
McGraw-Hill
A Division of The McGraw Hill Companies
Copyright © 1999 by The McGraw-Hill Companies, Inc. All rights
reserved. Printed in the United States of America. Except as permitted
under the United States Copyright Act of 1976, no part of this
publication may be reproduced or distributed in any form or by any
means, or stored in a database or retrieval system, without the prior
written permission of the publisher.
1 2 3 4 5 6 7 8 9 0 DOC / DOC 9 0 3 2 1 0 9 8
ISBN 0-07-135153-1
The sponsoring editor for this book was Stephen Isaacs, the editing
supervisor was John M. Morriss, and the production supervisor was
Modestine Cameron. It was set in Palatino by Inkwell Publishing
Services.
Printed and bound by R.R. Donnelley & Sons Company.
McGraw-Hill books are available at special quantity discounts
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to the Director of Special Sales, McGraw-Hill, 11 West 19th
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This book is printed on recycled, acid-free paper containing a
minimum of 50% recycled de-inked fiber.
Page v
Disclaimer
This book is designed for educational purposes only. It is not designed
to provide all the information required to be successful in day trading.
Day trading may involve a significantly higher level of risk in
comparison to other common forms of capital management such as
long-term investments in stocks, bonds, or mutual funds. Proficiency
at day trading may take a very long period of time to develop,
depending on an individual's capacity to understand the high degree of
risk involved, the aptitude to manage these high risks in order to
preserve capital, and the potential to develop any and all necessary
skills to create profitable results. Day trading may result in the loss of
all of a trader's capital and, in cases that involve the use of extended
buying power or margin, you may lose all your capital and assume
liability for owing additional funds that are substantially more than
your capital invested.
The authors and publisher will not assume any responsibility due, but
not limited to, losses incurred as a result of applying what is discussed
in this book. The authors and publisher do not claim or guarantee your
success at day trading or suggest that any past performance mentioned
in this publication indicates the same results will occur in the future.
Page vii
CONTENTS
Acknowledgments ix
Introduction xi
Part I: Trading Foundations
1. Market Basics 3
2. Risk Management, Psychology, and Discipline 11
3. Market Preparation 25
4. Forces That Move the Market 51
Part II: Building the Trade
5. Price Action and Momentum 61
6. Patterns, Trends, and Gaps 77
7. Efficient Order Execution 101
8. Trading Styles 117
9. Scalp Trade Examples 137
10. Swing Trade Examples 157
11. Core Trade Examples 171
12. Trading Notes 181
Page viii
Part III: Appendices
Appendix A: NASDAQ 100 Stock List 195
Appendix B: Standard & Poor's 100 Stock List 197
Appendix C: Glossary of Day Trader Terms 199
Index 205
Page ix
ACKNOWLEDGMENTS
We would like to thank our wives, Mara and Kelly, as well as our
parents and families for their unending support and confidence.
Our thanks to Jorge Jimenez of Momentum Securities, Irvine, CA for
his assistance and for persuading us to write this book.
Our thanks to the following firms for having provided us with data
and software for research and reference purposes:
The Executioner
www.executioner.com
CyberCorp Inc.
www.cybercorp.com
Window on Wall Street
www.windowonwallstreet.com
Equis for MetaStock
www.equis.com
Momentum Securities, Inc.
www.soes.com
Management of Momentum Securities, Irvine, CA
www.tradingacademy.com
Our thanks to Stephen Isaacs, our editor at McGraw-Hill, for his
patience and valuable assistance.
Page xi
INTRODUCTION
Since the beginning of time, people have been fascinated with the
concepts of speculation, competition, and the accumulation of wealth.
Although the stock market was not established with these intentions, it
nevertheless provides a forum for individuals to test their skills and
act out their fascination with those concepts. Of course there is an
alternative way to speculate, compete, and profit from such games. It
is called gambling, and casinos are the forums for individuals to test
their luck. Those whose career path leads to the stock market are
called traders, while those who are bitten by the casino bug are called
gamblers. If you have read enough, it would be a good idea to put this
book down and return to the workforce. If you cannot resist the urge
to go on and attempt to act out your fascination with speculating,
competing, and hopefully profiting from taking such risks, then you
should read this book before you start day trading. While it is true that
trading, especially day trading, borders on gambling, it is also true that
trading involves hard work in preparing for the market; a
determination to succeed; and the capacity to absorb, decipher, and
react to the constant flow of information that affects the market on a
daily basis.
Until recently, market makers, specialists, and institutional traders had
advantages over the public in determining the course of the stock
market and in the availability of valuable and timely information and
the ability to profit from the ignorant public. Today however, with the
speed of information, high-speed access to real-time quotes, and
instant execution of computerized trading, the public has every
opportunity that the professionals have to profit from trading in the
dynamic arena of the stock market. The difference is education and
experience.
By now you probably understand and are familiar with the impact of
day trading on stocks. You have heard of the risks and horror stories
of others attempting to day trade who lose everything. You may also
have heard of a select few who are making more money in one month
than most people make in a year. The truth is that while there is
unlimited potential to profit from the stock market, the failures greatly
outnumber the sucesses.