Day trading for dummies reading notes

Written by Keith McDonnell. Last updated on Sunday, March 03, 2013.

= Questions

Stocks generally trade in blocks of 100. Does this mean to avoid having more than
5% of your a/c in play you can only buy stocks below a certain level? eg

How long to achieve statistical significance with xtesting?

Use xtesting to calculate the win/loss probability

= Notes

Liquidity is the ability to buy or sell an asset in large quantity without affect-
ing the price levels.

Evaluating performance

In backtesting, a trader specifies the strategy that he or she would use and
then runs it through a database of historic securities prices to see whether
the strategy would have made money. The test includes assumptions about
commissions, leverage, and position size.

Start with a hypothesis

Past performance is not indicative of future results. A strategy may test per-
fectly, but that doesn’t mean it will continue to work. Backtesting is an impor-
tant step to successful day trading, but it is only one step.

Paper trading does not take into a/c the effect of the placing your trade

It’s better to do good simulation for months than to lose thousands of real

Profit & Loss statement (what time frame – daily, weekly?)

Technical analysis

Fundamental analysis can actually hurt you in day trading, because you may
start making decisions for the wrong reasons.

A pivot point is the average of the high, low, and close price for the day. If the
next day’s price closes above the pivot point, that sets a new support level,
and if the next day’s price is below the pivot point, that sets a new resistance

moving average. It’s calculated by averaging the closing prices for a given
time period

A tick is an upward or downward price change

arbitrage comes from the French word for judgment

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