Online Stock Day Trading
Pitfalls to Avoid

Make more money by avoiding fatal mistakes

I'm not a financial expert or a stock market wizzard. In fact I've lost quite a bit in the market through online day trading. My life situation is rather unusual due to Divorce Related Legal Problems and I won't go into all the details here, but I've lost money and made money in the market and I have advised several friends on how to make money in the market. I wish I had done what I advised my friends to do.

New - My opinion of the Microsoft Decision.

I'm putting up this page to share what does and does not work and what I've learned both as a winner and a loser. This page used to be my jump page into etrade and it made etrade a lot easier to use. But etrade created a new interface and this spot became obsolete. ETrade also considers this site to be unworthy to mention it's name. But since I had so many people using it I thought I'd put something else up instead. I'm in a phase of my life where I'm rather broke right now and hoping that if I help any of you get rich, or not get poor, that you'll share a little with me. Or at least I can make a little extra on the click through banners on this page.

The information on this page is just my opinion. Take into account that it may be wrong and I have been wrong before. Before you take any financial advice you should think it through and check it out. What ever you do should be your decision. If you take my advice and lose everything, it's not my fault. However, if you make it rich then I get the credit. (grin)

One of the secrets in being a winner trading stocks is not being a loser. That's where I'll start. I'll talk about how to lose money so that you will not do it. Then I will talk about how to make money and what did work. All this is from a mathematical perspective. I'm not into voodoo or gambling. In fact, daytrading can become online gambling if you're not careful. And gambling should be avoided.

NextCard Internet Visa

Selling Short

Selling short is a way to make money when a stock goes down. It reverses the order of buying and selling. Normally you buy a stock and later sell it for more. On a short sell you actually sell a stock you don't own with the idea that you'll buy it later at a lower price to pay it back. To give you an example of how this works, suppose I'm a car dealer and you want to buy a car from me and I'm out. However, a friend of mine has a brand new car in my shop so I borrow his car and sell it to you. Then before he gets back my new shipment comes in and I give Bob a new car. Because I borrowed Bob's car, I sold a car I didn't own and bought a replacement later for less.

Selling short is selling now by borrowing stock and selling later. When you sell stock you don't own it ties up money until you buy it back. The amount it ties up depends on the stock price. If you're on margins you can sell short twice as much as your cash reserves. Again keep in mind there are interest costs. You're betting the stock will go down. If you're gambling on the wiggles, you can make money on both sides of the wave.

Selling Short is a lot more dangerous than buying stock. When you buy stock if it goes to 0 you lose it all, but no more than all. And you can make an unlimited amount if it goes up. On a short sell if it goes to zero you double your money. But if it goes up you lose money and you can lose an unlimited amount of money. You can lose more than 100% by selling short. On a market that tends to rise overall selling short is swimming against the current. And even if you win 50 times in a row selling short, the one loss could easilly wipe out more than 100% of your money. You may be trading a real dog of a company and all of a sudden some big company buys them out and they tripple overnight. Not only does this wipe you out but you are in debt and all your previous winnings count against you because you used these winnings to sell more shares short.

Unless you're a lot smarter than I am, don't sell short. It's just too dangerous. There are safer ways to make money on stocks going down. You can buy PUTS which limits your losses to what you invest and has the ability to return more than double you money.

NextCard Internet Visa

I like Good Solid Tech Stocks

Tech stocks and the internet are the future. Most all the Fortune 500 are nerds. Computers, networking, and communications are the fastest growing stocks out there. not all are winners, but most are. You can invest in big solid companies like IBM, Cisco, Microsoft, Dell, Compaq, WorldCom and do well. I like to try to find some good startups that are well positioned because you often get more growth buying a calf than a cow. Several friends got in early with Qwest. Qwest was a company laying high speed fiber optic cable all over the country putting in the latest in high bandwith fiber and routers. How can you not make money doing that?

NextCard Internet Visa

Good Safe Plan

I've given this advice to several friends who have made a lot of money. It isn't as exciting as day trading but it works. Find big solid tech stocks and well positioned tech startups and buy in on a dip and leave your money there and forget it. That's what seems to actually work for most people who don't want to dedicate their lives to the market. If you want to play a little you can sell everything when the market seems to have run up too high and keep you money out till the next crisis and buy back in. Day trading is exciting but it's seductive and can cause people like myself who are highly skilled in mathematics to lose money.

If you want the excitement then pull out no more than 1/3 of your stash and play with it. Or better yet, play on paper. But playing on paper is seductive because you can win big for a while on paper, or if you lose on paper you might tell yourself that will never happen again. Always keep in mind the system is seductive and you'll find yourself gambling and losing. In order to win you have to be disciplined and stay with the math and not give into impulses.

NextCard Internet Visa


I hope this information has helped you. If you get rich an think I helped I would appreciate it if you could share a little with me. If you are a successful trader and want to contribute you wisdom and suggestion, I and others would appreciate that. Good luck trading.

My Other Interesting Links


Copyright Terms

People before Lawyers

A project of the People's legal Front