Expert: Mark Hodge - 7/17/2007

Question
QUESTION: I am very new to trading and had not invested yet.I am looking forward in investing on day to day basis.

I having been looking at the stocks and getting an idea about the companies..

I use Google Finance a lot as it shows us Clearly how the trading is going on a day to day basis.

I will not expect too much from a particular day.
May be a $ or $two increase in the share which i had bought.

Is it a good idea and am i in a good track.Any advice is appreciated.



ANSWER: Hello Sarasu,

I want to begin by congratulating you on your interest in learning more about trading. Trading can be a very rewarding hobby and/or career that is filled with opportunity, but also challenges. As you begin, you should determine what type of trader you are. Typically this falls into 2 categories when trading equities (stocks):

Fundamental - A fundamental trader will look for opportunities based on the fundamentals of a company. This trader will focus on long term growth, earnings, etc. Typically traders that use fundamental analysis are looking to be in positions for the long term.

Technical - A trader that uses technical analysis will look for opportunities based on a technical perspective. There are 100's if not 1000's of ways to approach technical analysis, and the benefits of technical vs. fundamental analysis are an ongoing debate. You will find that MOST traders that are looking to participate in short term moves (day trading or swing trading), use technical analysis to identify trades.

If you are looking to trade on a short term basis you should probably learn about different approaches to day trading. This is really beyond the scope of one question in this forum. Most day traders will agree that having a good strategy and TRADING PLAN are the key components for any successful trader.

Some questions to ask yourself as you create your plan:

How much money will I use to trade?
How much am I prepared to risk?
How much time can I devote to trading?
What is the timeframe I will use to trade?
What markets will I trade?

If you are set on day trading, and have less than $25,000, I would recommend you consider trading leveraged markets like futures, commodities, and forex (this is my personal preference for day trading even if you have more than $25,000, but as a day trader with equities you NEED to have $25,000). These markets might seem challenging, and the potential risk can be higher if you do NOT have a plan or know what you are doing, but if you are set on Day Trading you will find that these markets give you more "bang for your buck".

If you are new and have the time to trade, you might look for some companies that offer courses or coaching. Many times working with a company that offers these services can really kick start your learning curve and help you identify the common challenges and struggles that many day traders face, without learning them first hand and in a trading account. For a biased view on where to begin, please see my bio.

Happy Trading!

---------- FOLLOW-UP ----------

QUESTION: Thank you for the Info.
Here is what i am looking for.

I would like to start with $10,000 in hand.

I am planning for a fulltime..It would be a day trading mostly and would extend to if i am at loss.

Just with two or three shares a day...it is going to be my job...

I dont have any good stratagey...
I use google finance..as it list out all stocks sector vise.
I list them out based on the gain per day...etc etc
As i start one new day...as soon as the markets start..
i will look for companies where they are starting based on previous days performance....If they have raised...I will buy at the very begining of the day...If price increases.. by around $1 i will try to sell or look if it is raising...and take a decision based on that...
I will invest in stocks with in $50

In return i am expecting a $250-$300 profit atleast per day to start with.
Is this a good Idea..Is is possible to achieve my profit.
I am not sure because i am not a expert at it.

Really thankfull for ur guidence...  

Answer
Hello Sarasu,

The good news is that you have TIME to day trade (the first step). The bad news is that I don't think you have realistic expectations from Day Trading Stocks.

If you are Day Trading stocks buying and selling the same day, you will be recognized as a Pattern Day Trader and be required to have $25,000 in your account. With $10,000 to begin with, you are looking for 50-60% return on your investment in one month. When Day Trading stocks this is nearly impossible. YES, you might be able to capture some nice moves and get lucky one month, but with any good Day Trading strategy there will be losses and drawdowns...this is part of the business. I don't know of a single Day Trader that trades stocks exclusively that is able to achieve these results, and these are professionals.

Based on your goals and starting capital, I highly encourage you to pursue trading leveraged markets like futures and currencies, starting small with conservative goals, and then using more leverage to make more money.

Happy Trading!!!