Day Trading by Doc Barter

Money Management for Day Traders

Is the most important factor to be successful in day trading. The next rule is to pick an entry with the lowest risk possible and a set up showing a turn in either direction, e.g. long or short.

Lets use an example of 2 traders with positions to determine the rule of money management to minimize potential losses.

Trader A

Entering a position in ES in a none fibo/pivot relevant area and goes short.  He used to take 0.75 – 1.25 points on each trade if ahead. Now the market is going against him and he is 4 points behind at the close. He is holding the position overnight hoping or assuming the futures will gap down.

Q: How would you rate the risk and reward ?

Trader B

Entering  a position strictly based on fibo/pivot points. Upon entering he sets himself up for a clear target area and places a stop of 1.50 points as maximum loss. The target area is 3-4+ points away and the minimum he expects.

Q: How would you rate the risk and reward?

Trading Room

Upon participating in a trading room a real day traders should be aware that a certain percentage of room members are actually none traders. The lack of transparency is known and following a fellow trader can be an expensive lesson.

How to determine if a trader is bogus?

Trader A

Is known to take small profits of 0.75-1.25 points and enters tons of trades per day. He lets his loss run 4+ points.

Next day all of a sudden he leveraged if market goes against him or when market goes in his direction he takes the first 0.50-1.00 points as profit. He never loses.

Trader B

Never  announces any entry levels . He informs “short”, added , again added.

All of a sudden, the average entry becomes close to the intraday high even so entered at lower levels. The market turns against him and he has 4 points paper loss. He does not state a stop loss and talks about TA and shows lots of charts with zig zag lines.  Forgotten is the initial trade.

If trade is positive, he immediately is ready to post a profit

Trader C

Is entering a position known and exiting a position known. No matter a loss or a profit he shows it. He usually does have losses and profits but manages it with strict money management rules to keep it at a minimum. Positive trades he lets it run as far as possible and takes partial profits along the way. He does not have leverage positions nor does he add to a losing position.

Q: Which trader of the above makes common sense?

Emotions

A trader shall not enter a trade with emotions. Every trade is a business transaction. There is a buy and a sell. On each side are 2 parties – a buyer and a seller - . In business there are profits and losses and part of a normal business activity.

A trader shall not enter a trade with greed in mind nor monetary advantage in mind. It will influence his emotions. Instead he shall approach the trade as a business transaction or a game of chess.

Traders in a trading room being questioned after a while of irrational trading rules tend to change subject and react on a personal and not professional level. The questionnaire is immediately attacked with paranoid assumptions. The persons being caught by doing the obvious, namely bogus trades, are acting insecure and aggressive to overshadow the real issue. They want the questionnaire out as being exposed as a bogus trader is none acceptable for them. It needs to be covered and attentions needs to be diverted from the real issue.

Those actions of bogus traders within a day trader community will take effect on the trades if the rule of emotion is not followed. The rule is, bogus traders shall not communicated with nor entering a continuing discussion. With the first question towards a bogus trader a point was already made without stating the obvious. The message with the question was clear, namely " I know it is bogus" . Every other question or communication is not necessary and a distraction from the daily trades.

Keep emotions out of trading or communication of known bogus traders.

Trading Room - Sharing of Experience

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