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P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome vi P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome The Truth About Day Trading Stocks i P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome Founded in 1807, John Wiley & Sons is the oldest independent publish- ingcompanyintheUnitedStates.WithofficesinNorthAmerica,Europe, Australia,andAsia,Wileyisgloballycommittedtodevelopingandmarket- ing print and electronic products and services for our customers’ profes- sionalandpersonalknowledgeandunderstanding. TheWileyTradingseriesfeaturesbooksbytraderswhohavesurvived the market’s ever changing temperament and have prospered—some by reinventing systems, others by getting back to basics. Whether a novice trader, professional, or somewhere in-between, these books will provide theadviceandstrategiesneededtoprospertodayandwellintothefuture. Foralistofavailabletitles,visitourWebsiteatwww.WileyFinance.com. ii P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome The Truth About Day Trading Stocks A Cautionary Tale About Hard Challenges and What It Takes to Succeed JOSH DIPIETRO JohnWiley&Sons,Inc. iii P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome Copyright(cid:1)C 2009byJoshDiPietro.Allrightsreserved. PublishedbyJohnWiley&Sons,Inc.,Hoboken,NewJersey. PublishedsimultaneouslyinCanada. Nopartofthispublicationmaybereproduced,storedinaretrievalsystem,ortransmittedin anyformorbyanymeans,electronic,mechanical,photocopying,recording,scanning,oroth- erwise,exceptaspermittedunderSection107or108ofthe1976UnitedStatesCopyrightAct, withouteitherthepriorwrittenpermissionofthePublisher,orauthorizationthroughpayment oftheappropriateper-copyfeetotheCopyrightClearanceCenter,Inc.,222RosewoodDrive, Danvers,MA01923,(978)750-8400,fax(978)646-8600,oronthewebatwww.copyright.com. RequeststothePublisherforpermissionshouldbeaddressedtothePermissionsDepartment, JohnWiley&Sons,Inc.,111RiverStreet,Hoboken,NJ07030,(201)748-6011,fax(201)748- 6008,oronlineathttp://www.wiley.com/go/permissions. LimitofLiability/DisclaimerofWarranty:Whilethepublisherandauthorhaveusedtheirbest effortsinpreparingthisbook,theymakenorepresentationsorwarrantieswithrespecttothe accuracyorcompletenessofthecontentsofthisbookandspecificallydisclaimanyimplied warrantiesofmerchantabilityorfitnessforaparticularpurpose.Nowarrantymaybecreated orextendedbysalesrepresentativesorwrittensalesmaterials.Theadviceandstrategiescon- tainedhereinmaynotbesuitableforyoursituation.Youshouldconsultwithaprofessional whereappropriate.Neitherthepublishernorauthorshallbeliableforanylossofprofitorany othercommercialdamages,includingbutnotlimitedtospecial,incidental,consequential,or otherdamages. Forgeneralinformationonourotherproductsandservicesorfortechnicalsupport,please contactourCustomerCareDepartmentwithintheUnitedStatesat(800)762-2974,outsidethe UnitedStatesat(317)572-3993orfax(317)572-4002. Wileyalsopublishesitsbooksinavarietyofelectronicformats.Somecontentthatappears inprintmaynotbeavailableinelectronicbooks.FormoreinformationaboutWileyproducts, visitourwebsiteatwww.wiley.com. LibraryofCongressCataloging-in-PublicationData: DiPietro,Josh,1976– Thetruthaboutdaytradingstocks:acautionarytaleabouthardchallenges andwhatittakestosucceed/JoshDiPietro. p. cm.–(Wileytradingseries) Includesindex. ISBN978-0-470-44848-9(cloth) 1.Daytrading(Securities) 2.Electronictradingofsecurities. I.Title. HG4515.95.D572009 332.63(cid:2)228–dc22 2008054930 PrintedintheUnitedStatesofAmerica 10 9 8 7 6 5 4 3 2 1 iv P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome Iwouldliketodedicatethisbooktoallday-traders, amateurandprofessional,whohavelearnedthehardway. Tothetraderswhounderstandthatbecomingasuccessful day-traderisaprocessthatcannotbefast-tracked. v P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome vi P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome Contents Preface xiii Acknowledgments xvii Introduction: The Wholehearted Amateur 1 PART I Psychological Truths and What to Do about Them 5 CHAPTER 1 Truths about Yourself to Know First 7 HowOftenDoYouTrade,andHowProfitably? 10 HowMuchAreYouTradinginCapitalandLeverage? 10 HowLongHaveYouBeenTrading? 12 WhatFinancialInstrumentsAreYouTrading? 13 AreYouTradingOtherPeoples’MoneyorYour PersonalCapital? 13 AreYouaLicensedTrader,orTradingIndependently? 13 HowWereYouTrained? 14 RulestoRemember 14 CHAPTER 2 How Emotions Can Destroy a Trade 15 TheFearFactor 16 GreedIsNotGood 18 RulestoRemember 21 vii P1:JYS FM JWBT098-Dipietro May6,2009 10:23 Printer:Yettocome viii CONTENTS CHAPTER 3 Preventing Overconfidence 23 IgnoringYourPredeterminedStop/LossPrice 24 HoldingTooLong 24 RulestoRemember 26 CHAPTER 4 From Impatient to Cool, Calm, and Collected 27 TheWaitingIstheHardestPart 29 DecidingtoLearnMore 31 RulestoRemember 33 CHAPTER 5 Taking Breaks 35 BreakWhenYourConfidenceIsLow 38 BreakBecauseIt’sJustNotWorking 38 BreakandThenWhat? 39 RulestoRemember 42 PART II The Truth about Your Risk 43 CHAPTER 6 The Importance of Risk Management 45 TheAmountofTradingCapitalAllocatedtoEachTrade 46 TheTimingforAllocatingCapitaltoaTrade 47 OverexposuretoRisk 48 TheStockorCompanyYou’reTrading 49 TheTimeofDayYou’reTrading 49 Gambling 50 RulestoRemember 51 CHAPTER 7 Why Overexposure to the Market Can Hurt 53 TimeversusTiming 54 RulestoRemember 58

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P1: JYS FM JWBT098-Dipietro May 6, 2009 10:23 Printer: Yet to come The Truth About Day Trading Stocks i