Whenever I am asked the question on how to become day trader, I tell people who have never day traded before that they first need to read a book called Beyond Candlesticks by Steve Nison.
Second, understand what a buy and sell is and a short and cover. You need to know the day trading lingo. I have included some day trading vocabulary words and definitions below.
Next, I suggest you paper trade only with the amount you would be trading in real life and following the patterned day trading rules, if you are going to be day trading with less than $25,000 in your account, otherwise you are limited to three trades a week. Those are IRS rules. We use eTrade as our broker to buy, sell, or short and cover our trades. You are in luck because they are not charging commission fees right now when you start trading real money.
Next, you should join a chatroom such as www.fastmoneytraders.com Luke Murray starts live on the mic 30 minutes prior to the bell and throughout the day taking you through our trades and alerting trades that are worthy of taking a look at. He explains why he took a particular short, he looks at the volume and reads the news.
Luke also posts his trades after they have happened of course on Twitter Luke Murray@EliteDaytraders
Things to know about Day Trading
A good day trading chat room can increase your revenue. www.fastmoneytraders.com best day trader chat room on the Internet. Luke Murray has over 24 years of day trading experience with over 8 years of being a moderator. You can also follow him on Twitter Luke Murray@EliteDayTraders
We use eTrade for shorts, Ameritrade is terrible for doing shorts, all brokers have pros and cons, but eTrade seems to have the best shorts. Additionally, eTrade is not charging commissions on trades at this time. Trade on etrade.com from 7 a.m. to 4 a.m. ET, and by phone at 800-387-2331 from 4 a.m. to 7 a.m. ET (broker-assisted fee waived), excluding market holidays. View and/or cancel orders from any platform or device.
eTrade charges hard to borrow fees on Friday for three days, not all Brokers do this but eTrade also is better for shorts and has more volume to sell than other brokers do.
Day trading is the simple act of buying shares of stock with the intention of selling those same shares on the same day. Someone who holds on to a stock for longer than a day is not a day trader.
Why belonging to a day trading chat room like www.fastmoneytraders? Because it will make you more profitable and more disciplined.
Proven record with our clients
24 years of day trading experience and over 8 years of experience of running a day trading chatroom
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Day Trading Lingo
ASK – is the lowest price a seller is willing to accept.
ATH – at the high (for the day)
ATL – at the low (for the day)
BID – is the highest price a buyer is willing to pay.
BO = break out
CB = circuit breaker halt – when it goes up or down 10 percent or more in five minutes you are supposed to halt it
COV = covered
ETB position overnight is called a free short. If you short a stock and it does not have an HTB fee there is no charge other than your transaction fee.
FOK = Fill or Kill
GTC = Good until cancelled
HTB = Hard to borrow fees. If there is an HTB you pay it regardless if you hold it over night or not.
HOD – high of day
PHTB = pending hard to borrow fees
PND = pump in dump
IPO = Initial Public Offering
LOD = low of day
SS = short squeeze or short sale
SSR = short seller restriction
After Hours Indicator is calculated based on last sale prices of Nasdaq-100 securities during after-hours trading, 4:00 to 6:30 p.m. ET. And if a Nasdaq-100 security does not trade in the after-hours market, the calculation uses last sale price from that day’s 4 p.m. closing.
Bear or bearish refers to a weak market. This word means that stock traders will think stocks or a specific stock will go down. If their shares are bearish, they may sell their bullish positions or even short their positions.
Buy to cover is a buy order made on a stock or other listed security to close out an existing short position. A short sale involves selling shares of a company that an investor does not own, as the shares can be borrowed but need to be repaid at some point.
Cash flow positive – indicates that a company’s liquid assets are increasing, enabling it to settle debts, reinvest in its business, return money to shareholders, pay expenses and provide a buffer against future financial challenges.
Day: If you do not specify a time frame of expiry through the GTC instruction, then the order will typically be set as a day order. This means that after the end of the trading day, the order will expire. If it is not transacted (filled) then you will have to re-enter it the following trading day.
Float – a float refers to the number of outstanding shares that are available to trade. When a company does an IPO, they release shares. That number is typically the “float,” although there are three ways the number of shares can change. The float is equal to the supply level. Stocks with limited supply and high demand are the ones that move up or down the fastest.
Flush – A “flush” happens on the charts when a stock has bottomed for the day.
Limit Order – A limit order specifies a certain price at which the order must be filled, although there is no guarantee that some or all of the order will trade if the limit is set too high or low.
There are four types of limit orders:
- Buy Limit: an order to purchase a security at or below a specified price. Limit orders must be placed on the correct side of the market to ensure they will accomplish the task of improving price. For a buy limit order, this means placing the order at or below the current market bid.
- Sell Limit: an order to sell a security at or above a specified price. To ensure improved price, the order must be placed at or above the current market ask.
- Buy Stop: an order to buy a security at a price above the current market bid. A stop order to buy becomes active only after a specified price level has been reached (known as the stop level). Buy stop are orders placed above the market and sell stop orders placed below the market (the opposite of buy and sell limit orders, respectively). Once a stop level has been reached, the order will be immediately converted into a market or limit order.
- Sell Stop: an order to sell a security at a price below the current market ask. Like the buy stop, a stop order to sell becomes active only after a specified price level has been reached.
Market Order – A market order simply buys or sells shares at the prevailing market prices until the order is filled. Commissions are usually lowered on market orders.
A market order is the most basic type of trade. It is an order to buy or sell immediately at the current price. Typically, if you are going to buy a stock, then you will pay a price at or near the posted ask. If you are going to sell a stock, you will receive a price at or near the posted bid.
No volume high spread = selling your shares may affect prices in a low-volume stock. The stock’s low liquidity means they can take advantage of wide bid-ask spreads.
One important thing to remember is that the last-traded price is not necessarily the price at which the market order will be executed. In fast-moving and volatile markets, the price at which you actually execute (or fill) the trade can deviate from the last-traded price. The price will remain the same only when the bid and ask prices are exactly at the last-traded price.
Important: Market orders do not guarantee a price, but they do guarantee the order’s immediate execution.
Over and short—often called “cash over short”—is an accounting term that signals a discrepancy between a company’s reported figures (from its sales records or receipts) and its audited figures
Short Covering? Short covering refers to buying back borrowed securities in order to close open short positions at a profit or loss. It requires the purchase of the same security that was initially sold short, since the process involved borrowing the security and selling it in the market. For example, a trader shorts 1,000 shares of XYZ stock at $20 per share, believing the share price will fall. Instead, the price rises to $25 per share. The trader has substantial loss exposure, so she purchases 1,000 XYZ shares at $25 per share to cover her short position.
Short Squeeze – is a rapid increase in the price of a stock that occurs when there is a lack of supply and an excess of demand for the stock. Short squeezes result when short sellers cover their positions on a stock, resulting in buying volume that drives the stock price up.
Shorting, or short-selling, is when an investor borrows shares and immediately sells them, hoping he or she can scoop them up later at a lower price, return them to the lender and pocket the difference. But shorting is considered much riskier than buying stocks, or what’s known as taking a long position. However, the past year has been conducive to shorting stocks.
Stock Splits – A stock split is a decision by a company’s board of directors to increase the number of shares that are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split, an additional share is given for each share held by a shareholder. … A stock’s price is also affected by a stock split.
Stop Orders – A type of limit order, are triggered when a stock moves above or below a certain level and are often used as a way to insure against larger losses or to lock in profits
Take Profit: A take profit order (sometimes called a profit target) is intended to close out the trade at a profit once it has reached a certain level. Execution of a Take Profit order closes the position. This type of order is always connected to an open position of a pending order.
Trading Below Cash – is when a company’s total share value is less than its cash minus their debts. It occurs when a company’s market capitalization is less than its amount of cash on hand.
IMPORTANT: Not all brokerages or online trading platforms allow for all of these types of orders. Check with your broker if you do not have access to a particular order type that you wish to use.
Disclaimer: The information provided in this article is as a service to investors. It is neither a legal interpretation or a statement of policy. If you have questions concerning the meaning or application of a particular law or rule, please consult with an attorney who specializes in securities law. Stop Loss orders and Stop Limit orders may not be available through all brokerage firms. Investors should contact their broker to determine which orders are available for buying and selling stocks, and their broker’s specific policies regarding these types of orders.