Guide to Day Trading Strategies

Gamblers think about Pro
À
 ts, Traders think about Risk
The stock market is a place where all different personalities come together to trade. You will 
À
nd 
long term investors, institutional investors, activist investors, retail traders, and you will also 
À
nd 
gamblers. Unfortunately, day trading has a negative connotation to some who consider it the 
equivalent to gambling. Any full-time trader understands that that is far from reality. A trader 
makes decisions based on a strategy that has historical data to support it. The only way to make 
a career out of trading is to understand your risk on every trade and to follow the rules of your 
trading plan. But, there will always be those who simply gamble with their trading accounts 
by taking reckless positions in the search of huge pro
À
ts. If you want to gamble, you might as 
well go to a casino. The odds of having a lucky trade and making a fortune in the stock market 
are extremely slim. You cannot base your strategy or your career on luck. Greed is a powerful 

---

H O W T O D A Y T R A D E
11
emotion that, a lot like fear, can allow you to throw out your rational thought processes. If you 
ever 
À
nd yourself feeling that emotion of greed kicking in, it is a good time to turn off your 
platform and walk away. Since we are trading with and against the best traders in the world, if 
we are not able to trade at our peak performance levels, we should not be trading.
Add to Winners not to Losers
Although there are many traders and investors that utilize a strategy of scaling in, adding shares 
at various prices to get a good cost basis, I avoid adding to stocks that are below my entry price 
for day trades. If I purchase a stock at $10.00 and it drops to $9.50, I could double my position 
and adjust my cost basis to $9.75, but then I am adding to a losing position. If it drops to $9.25, 
I will experience a loss double than the initial loss if I had simply sold at $9.50. In all my years 
of trading, I have found the best trades work almost immediately. Occasionally, I will get into 
a trade and it will nearly touch my stop and then turn around and end up being a winner, but 
more often, those trades turn into losers. Instead of adding to a losing trade, I prefer to cut the 
loss and move on to the next opportunity. When you focus on adding to losers, you risk making 
the loss bigger and you miss the opportunity to 
À
nd a better setup.
In contrast, if I buy a stock at $10.00 and it goes up to $10.50, I may double my position and 
have a new cost basis of $10.25. If the stock surges up to $10.75 or $11.00 I’ll make more with 
the increased position, and if it the stock drops back down to $10.25 or $10.00, I can sell for 
breakeven or for a small loss. Adding to winning trades gives you the potential to have big 
winners, while adding to losers gives you the potential for big losses. Since we want to focus on 
capping our losses, we need to avoid adding to losers.