From the April 01, 2009 issue of Futures Magazine • Subscribe!

Day Trade Online

Day Trade OnlineBy Christopher FarrellJohn Wiley & SonsHoboken, New Jersey$29.95, 181 pages

There’s been plenty of debate over whether you can legitimately and consistently profit as a day-trader. Many argue day-trading is gambling and nothing more, often citing the many day-traders who went belly up when the dot-com bubble burst. Others, including author Christopher Farrell, claim it’s a legitimate profession and that you can profit by using the right strategies.

As the markets become more electronic, Farrell argues, the playing field has become more level than at any time in history. However, day-trading requires that you think and act differently than the tradition buy-and-hold investing public, by seeking short-term trading opportunities and profiting from the supply and demand imbalances that occur in the markets.

Farrell explains how the bid/ask system works, the role of the specialist in the process, how day traders can exploit the bid/ask spread, and why successful traders must be contrarians. This provides the foundation for a successful day-trader to make consistent profits regardless of the prevailing market conditions.

He also explains the ins and outs of trading strategies, including scalping, buying on bad news, gap opening trades, buying and holding a position overnight, buying on pullbacks and shorting. Through careful explanation and outstanding examples, even the novice day trader will have a solid grasp of what’s required to be successful.

Further, Farrell explains the common mistakes many day traders make, and how to avoid them. It’s a long list, including how to avoid wide spreads and delayed quotes, the hazard of not cutting losses quickly, why you shouldn’t buy a stock you have lost money on, and never trading on the afternoon before a holiday.

The book includes additional tips and tactics to increase the likelihood of success, including choosing an online broker, finding the best commission rates, setting up two accounts, keeping good records, allocating your trading capital appropriately, trading on margin and how a margin calls work. By following the strategies laid out, you should be able to consistently make short-term profits.

Chris Seabury has more than 12 years experience following and writing about financial markets. He’s dedicated to helping investors and traders understand how markets work and how to benefit from them. Reach him at associatep@gmail.com.

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