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Trading Strategies & Methods

By far the most of the trading day precedes with a constant screening of 400 selected stocks in the actual trading system. These stocks have been chosen from the selected stock lists wich are listed at Finance.yahoo.com. Certain parts of the stocks in the trading system are basis for constant replacement. In addition to this on a daily basis a “focus list” is being prepared, typically consisting of 30-50 stocks solely registered on Nasdaq and in particular cases also on NYSE and AMEX (excluding OTC BB). Consequently these stocks are beforehand selected for active trading if Nasdaq is expected to fluctuate considerably. This list is prepared for fluctuations in upward as well as in downward direction because the focus list consists of both stocks for long as well as short positions. In addition to this on a daily basis a list of about 20-30 stocks listed on the exchange for micro caps, the OTC Bulletin Board is being prepared. OTC-stocks are however frequently repeated from the previous trading day. Naturally constant trading precedes throughout the trading day on any considerably news from by far all other companies.

All trades takes place in a information and trading system with option for routing to many different market makers and ECNs. These have what we can describe as different “intelligences” or slight differences for executing trades in the market. All trades – without exception – finally takes places on the basis of market depth also called level II. Besides this, look at present market depth as an example. Here you also will find additional explanation plus examples of ECNs and Market Makers.

As for the more concrete trading the approach to this can in short be characterized respectively as Scalp trading, Day trading and Swing trading.

Flemming Kozok on tour in the Caribbean, winter 2008. Here Tortola/ British Virgin Islands. (Private photo)

Some good advice

Flemming Kozok will in the following spare some good advice for the person who consider trying one's skills with day trading. Kozok will also refer to potential risks and consequences combined with day trading.

What is my profile?

If you want to practice day trading it is extremely important to find out what sort of trader you are. Which of the above categories do you fit into – and not least: What do you uttermost feel like? Is the feeling not present when you already are considerably weakened, as day trading is an immensely fatiguing discipline.

In spite of the method chosen – or more – which you think suits you best, it is extremely important to become closely acquainted with the market and the stocks you chose to day trade. This naturally is a must for any stock trader, day trader or not. Still day trading in particular will ”exhibit” the traders acts if he has not managed the demanded close relationship with plays in the market as well as the relevant stocks way to behave. This is wisdom one continually will acquire, but only achieved – and not least fastest – by dedicating a lot of time and many efforts on the activity. In other words, let the acquaintance with day trading be a very intensively development.

Regardless of the approach practiced discipline will be a keyword. Only the disciplined day trader will survive in the long run. This may sound like a cliché; but none the less it is completely true.

Prepare the trade

Another fundamental must for the day trader is to have a plan of how to approach the actual trade:

- What are the arguments to perform the actual trade?
- What is the basic approach to the trade and what is the purpose of it?
- How will you execute your entry?
- How will you leave the position and what are the arguments?
- How will you execute your exit?

The successful day trader will always have a clear idea of the above aspects before the entry of any position. The ability to throughout a trading day to perform a flood of the above sort of analysis in extreme short time is a ability the day trader over time will develop. Experience and a close insight in how the market, as well as the actual stocks performs under given circumstance is the most important ingredients for development of this skill.

In relation to the view of the above analysis and on a general basis a sound attitude for the day trader is to be humble. He should also take note of what Socrates once said, “I know nothing except the fact of my ignorance.”. Only the stupid thinks he knows what a stock will do. The educated will live with the knowledge that one never at any time knows anything, but instead solely observes indications of varying strengths. This consciousness and attitude will contribute the active trader to identify wrong trades at an earlier stage, as well as accepting the need of stop loss. This element is partly related to another important fundamental attitude which the day trader should be aware of, namely always to be prepared for the unexpected; always being open-mined for anything to happen. Even when you think it cannot happen. With the right attitude you will achieve by far the most.

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