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A daytrader is an individual who seeks to realize
trading profits in the shortest possible time frame, usually buying and
selling all in the same day. Daytraders open positions, long or short,
in which a move of a point or even a fraction of a point is expected in
the very near term. It is not uncommon for a position to be opened
and closed in the space of a few minutes.
A 1/8 change in a position of 1000 shares equals $125; a change of 1/4
equals $250. Hopping in and collecting these small bites is what
a daytrader does. Most positions will be opened anticipating a move
of at least 1/2. The daytrader's work is to read the data,
select the index/stock that is going to move, and get the execution.
When I was first introduced to daytrading, I was
not very impressed. My instructor talked about risking a pile of
money to make $600. He caught my attention and I was impressed later
when he said, "One year I did that trade about 500 times." (Do the
math.)
Does the TOAD Train Others?
There have been numerous requests to learn from the
TOAD. For more information, use the link on the first page or click
here to go to "Training by the Toad."
It is imperative that a daytrader have access to real time quotes and access to a broker who will execute trades immediately. I use a multitude of different sites, most mentioned on these pages.
A good all around site is The Investment FAQ: http://invest-faq.com/ and a great market news source is ABS Live with Drew Robertson's updates every hour during market hours:
http://www.abslive.com/mainabs.html.
How did the Toad get started?
I started out buying mutual funds, subscribed to
a mutual funds newsletter and consistently got 18 to 20% return per year. I read and looked at futures, options, etc. about 5 years ago. About 3 years ago I attended some seminars and started trading stocks and then stock options. I purchased stocks and sold calls on the stocks I purchased. I was successful for awhile and then found myself holding nothing but bad stocks. I had been called out of all of the good stocks (because they had risen in price) and I was left holding the dogs (because their prices had fallen.) I also tried trading equity (stock) options, puts and calls. Then I discovered the S&P 100 index options (OEX). The OEX is a combination of 100 stocks traded on the various exchanges and the OEX moves with the market. The OEX is not tied to good or bad news of one company - if I can read the market, I can make money. This is what I have
done for the last year.
This has been an expensive learning process but I am now making money. - often small amounts of money - and, in the process, Learning what probably works and what probably doesn't work.
My goal is to consistently make $500/day.
Do you trade over the internet and what broker do you use?
I always trade over the web. I use e*trade, only because of their options pricing. If I could find a cheaper web broker, I'd probably try them. Will probably change from e*trade some day.
For options I pay $20 per trade plus $1.75 per contract with a $29.00
minimum. So as you can see from the web site, I'm paying $145 to get
into and back out (round trade) of a 30 contract position, $110 for 20
contracts and $75 for 10 contracts. Let the Toad know if you find a more
competitive price. I can beat e*trade's price on stocks ($14.95 & $19.95
per trade) but not their option prices.
Where do you get
real-time quotes?
I get 100 free real-time quotes for each trade
at E*Schwab and e*Trade gives me free real-time quotes if I make about
10 trades a month. The price for real-time quotes is $30 per month, and
I get credit against the $30 for each trade, I think the break even is
10 trades.
What is the TOAD+10 system that you mention? How can I use it?
Toad+10 is a recently discovered phenomena wherein a Toadster follows a Toad into a play 10 minutes after the Toad enters. Often the position will "back off" after our purchase and the Toad+10 gets in at 1/4 to 1/2 less than the Toad. Then you pick your exit and make money.
We have tried to track the Toad+10 and it seems to work a lot of the time - don't have all of the data, it is often hard to reconstruct and we are trying to keep better records of the Toad+10 now.
Shoulda, coulda, woulda...
I got real tired of my job, it wasn't fun anymore and I was attending and purchasing lots and lots of training about stocks, the market, etc. So, after I had about three good months, I quit work.
Then I proceeded to learn - lost bunches of bucks. Had sold equity calls and the stock tanked, but I was bound to the calls so I couldn't sell - shoulda bought the calls back and sold the stock - didn't. My portfolio went from lots of good stocks to getting called out of ALL of the stocks that went up and all that was left were the dogs. So I had a portfolio that had decreased significantly in value. I was buying moving stocks and selling options on them - long term it will bust you. I also lost a bunch on pharmaceuticals (that's when I learned about Phase II and Phase III testing.)
So, I went to some more training and somehow discovered options on the OEX. I was mentored by someone and it was simple enough for a Toad to understand. I liked the prospect of NOT GETTING KILLED on some news about a company, I also liked something that moved with the market.
Also investigated Futures a little bit - don't like something that has the potential to lose more than your original investment. Not cool.
My mentor showed me what he did, hopped in and hopped out - rode the market waves for a short distance and then got out.
So, that is what I have been doing, became the "Toad" in a contest (The Options And Daytrader) and started posting to the internet when my mentor stopped his site.
What do I need to trade OEX options?
These questions (1 thru 9) came from a New Toadster:
1) MONEY
Yep
2) A Computer
Yep
3) A Web Browser (Netscape or Microsoft)
Yep
4) An ISP (Or perhaps two in case the first one fails).
One should do it, in an emergency you could phone your internet broker.
5) A broker who trades options.
Yep, PLUS you need to complete all of the Options Paperwork with your broker to get approved to trade options.
6) I have no knowledge of Yahoo Messenger, but my netscape supports AOL Messenger. Can I use that instead?
Nope, that is a completly different system - sort of like different radio stations.
Yahoo Messenger is free and is easy to install. Go to the Toad Links page, click on the Yahoo logo. From the Yahoo Messenger page, download the program and get a Yahoo name!
7) I assume I need a real time quote service. Do I have to have option
quotes, or just stocks. Should I get something like signal?
First - read all of TOAD 101 page.
You can get free real-time quotes from etrade or other brokers, see the "real-time quotes" question for more details.
It is not necessary to pay for a real-time charting or quote service.
8) Do you have any Toadsters who use only email, skipping Yahoo Messenger?
Yes, but you will prefer the real-time Yahoo messages.
9) What else?
That should about do it, you will need some "EXPERIENCE" also - you can sure get closer to understanding all of this if you read all of the TOAD 101 and go to the links suggested there.
Tell us about your loss strategy.
I'm impressed with your trading results however I am concerned about some
of the large losses.
Me too.
Have you learned anything that would have prevented these losses?
We think so, also have calculated how much we could have saved (lost less) if
we had just cut the losses in half - it's amazing.
We use a procedure (adapted from William J. O'Neil in his book How to Make Money in Stocks - read it!). His "system" is the one where you should NEVER lose money on a position once you have gone into the black - (stocks in his case, but it works for options also).
So, if you buy the option or stock at $25 and it goes up to $30 - your stop
loss should be raised and will be above your entry price. If it then drops -
you are guaranteed your profit as you will exit the position above your entry.
If it continues to rise, then you continue to raise your stop loss.
Now, on the down side - we pretty much decide how much we could lose and not
have it bother us a lot. Put this in as our max loss. Then as the position
moves up you move your sell point up to follow as in the previous example. So
if you enter a position at $25 and you have 1000 of them a $1 drop = $1000.
If your maximum loss is $3000 then when your position moves to $22, you would
sell.
You should be a little flexible with this - but this is the basic
"system." Note: as the position moves up your maximum loss is recalculated
and your maximum loss becomes smaller and smaller until you are in profit.
This actually sound a lot more complicated than it is - write down $25 as your
entry and then next to it write $22. When the position hits $26 write $23
next to it. (You just lowered your maximum loss by $1000!)
We try to keep EVERYTHING we do as simple as possible - get good at one thing
and make money doing it.
How do you determine your trade size?
We trade 10 to 20 contracts almost all of the time, sometimes we do 5 or 15
contracts. I attended a seminar on how to calculate the size of the trade and
I have read somethings about never trading the same size, if you lose change
the size, etc... Didn't work for us.
Ten contracts seems to work - 5 if I'm iffy about the trade... maybe...
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For instance, let's say we have 5 contracts open that cost us $7 each =
a total cost of $3500.
Our current loss tolerance is in the $3000 to $4000 range. We could lose or dump the whole position and live with it.
So, we can ride and hold onto a position within our loss tolerance range and give it an opportunity to make money - as long as we still see positive indicators in our direction.
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I work full time. Is it possible to use your service while working during the day?
I have a lot people who tell me they trade during the day and work...
I want to try daytrading for a living - how much could I reasonably make starting with X Dollars?
All I can tell you is what we have done: our average trade is around $11,500 and we started this with about $28,000.
Put $2 on it?
We ALWAYS put $2 on the order as soon as we get confirmation that we bought. Why $2? We used to do $1 and we would get sold out when the market was racing with us. SO, when we put the $2 sell in, we
have time to watch the market and raise the sell point to ride the
market and we can still drop the sell point if we see it going against
us when we want to get out. Sometimes we get sold out at $2 right away and
don't have time to raise the order - we like making $2 more than making $1.
Cell phones and pagers?
1. If you have a cell phone that can receive emails (lots of people do) then we can email our updates
to your cell phone.
2. If you have a pager that can receive emails (lots of people do) then we can email our updates to your pager.
We maintain two different pager lists - one for the pagers that receive 240 characters and the other for the pagers that receive 80 characters. The 80 character pagers receive an abbreviated message that just says:
Hopped into X contracts of July685Puts (OEYSQ) at $XX.
There is NO extra charge for this service. If you are a "Free Trialer" or if you are a subscriber - we don't charge extra.
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Daytrader TOAD's