Day Trading - Dont get Greedy!

by steve loughlin

Since I publish the traders site: www.BanzaiDaddy.com, Im always getting friends trying to get that golden nugget of information from the horses mouth ( that would be me - sometimes its a different end ).

More than questions, I get the statements : "Man, if I had your information and trading knowledge - I could make a killing in the market!" or "Why settle for a little each day, when you could Really clean up?"

My answer ? Dont get Greedy !

Once you start trading, its easy to find yourself in this destructive pattern...

As a beginner, you start out just wanting an extra $100 a day - maybe an extra $ 300 a week. You get lucky. Fantastic trades seem to come easy - too easy. Now that $100 a day is bumped up to $300 a day and that weekly goal gets pushed up to $1,000.

You start to let the dollars get in the way of common sense. You figure if its this easy to make money trading - maybe Ill increase the amount of contracts or the number of shares I trade.

Suddenly instead of trading 500 shares, youre trading 1,000. Instead of sticking with one or two contracts on the emini, youre punching in five or ten contracts!

You figure, what the heck...this is like taking candy from a six year old!

Then one day, after weeks of endless wins - the real world hits you in the face.

That 10 contract trade on the Mini Russell all of a sudden starts to turn against you. You stare at the screen in disbelief... This cant be happening! Ive been trading this technical pattern for three weeks without one losing trade!

In your cockiness, youve stopped using stop loss orders and now your trade is dropping - and Fast! You just know its going to turn around any minute. You also know that with the Mini Russell each point per contract equals $100. Youre trading 10 contracts ( because thats the way to make the Big Bucks - right?). That means for every tick - youre either making or losing $100 !

You hold and hold and hold...Seconds go by like hours. Youre frozen. Common sense tells you to bail. That greedy little voice in the back of your mind tells you to keep watching.

When your pain threshold reaches the limit, you hit the panic button and place a market order to dump everything! Now!

Youve managed to make $4,000 in the past few weeks and in one fell swoop youve just lost $5,000 ! And hopefully youve learned a lesson - Dont get Greedy.

Trading large can make you a lot of money. It can also take it faster than you made it.

Since I trade the eminis, let me give you an example of trading just one contract at a time.

Well assume you will trade five days a week - 50 weeks a year. Holidays wont be taken into consideration...Well also use Five (5) points a day as our target and no commission will be figured.

Trade the S&P 500 emini and youll make: $250 / day $1,250 / week $5,000 / month $ 60,000 / year

Trade the Mini Dow and youll make: $ 250 / day $ 1,250 / week $ 5,000 / month $ 60,000 / year

Trade the Mini Russell and youll make: $ 500 / day $ 2,500 / week $ 10,000 / month $ 120,000 / year

Trade the Mini Nasdaq and youll make: $ 100 / day $ 500 / week $ 2,000 / month $ 24,000 / year

On most trading days, you can easily do this in the first two hours of trading - since thats when most of the action occurs.

So the question is: How much money do you want from two hours of work - average?

If you really want to get grounded, ask yourself what youd make working two hours in a normal job?

Above all, use common sense when trading and dont trade over your head. Small, consistent profits over the long haul will win out any day.

Steve Loughlin is a trader and publisher of the Trading Website: www.BanzaiDaddy.com Let BanzaiDaddy.com be your online source for all your trading needs and education. Learn to trade well -<br /> the money will follow!

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