that way I can add to positions with sufiioiont contracts wtion needed, h is also the rcnson I must be out of tiie nir-trkot before the close-There absoluiely cannot be any overnight posUions, unless I have decided to change my trade into a position trade,

"his puts ihe burden of time on me. There is a definite limo constraint. I have 1rom th.e opening of traciing until the close to make my money, if I have failed by tti<NV I cSose niy position - win or lose - and get out.

I make absoEuieJy sure that my refationsfisp with my broker is solid. The broker works for me. I vill be delegating a certain amount of authority each and every titme 1 issue buy/sell orders.

prefer a broker who doesnt trade a personal account. 1 dont want my broker lading my bets. I also dont want a broker who gives advice. If it is offered, I fjolitely inform my broker that 1 dont want to hear it. If it is offered again, 1 rpiove my account. Broker advice can cause me to lose the courage of my convictions.

Also, 1 want a broker who can keep my activities confidential. I dont want tiie broker to give (tiy trades to any other clients.

I have had brokers who were piggy-backing my trades for their own accountis). With one broker, when the tills cariie back, he was grabbing the best ones for his r-iccounr, and giving me the lesser fills. You can tell this is happening wlief> you start getting consistently lousy filfs or vhen a broker doesnt issue ticket nuribers.

IVadiiiii P!;in

WAfJINGl rJo one should attempt daytradirig from five minute charts unless he is a decisive, quick thinker. If a person tends to panic when things go wrong, then that person should not irade five n-iinute charts. No one should trade a (ivr» minute chart who is paying more than 525 total in comruissions ami costs. No one should trade a five minute chart who is not able to call directly to the Moor.

Ive taken care of all the loose ends. Ive talked about trade selection, entry points, stops, ordering, brokers, comanissions, and hotisokeeping. Now, talk about daytrading, and specifically daytrading intraday bar charts.

Approach

My approach to trading is simple: MAKE MONEYf In order to do Ihat I must STAY ALIVE. Tfie other side of that statement is: DONT LOSE MONEY! Refuse to lose.

In Trading By The Book. I offered set of character traits that wokld make anyone a better trader. Those traits are worth repeatirg fiero. I quote:

"Self-discipline

Knowledge

atience

Solf-contro

Resourcefulness

Diligence Flexibility

Conceri trabon

Decisivaofjss

Persistence

Discretion

Pcrsevera nee

Consistency"

tn addition 10 die above atiriboies. d")erd rriusi t)e total honesty and

truthfulness. I must know mysetl and my weaknesses, 1 emotiotally, mentaJly arid physically ht. ard ready to take action vjlien needed - without procrastinahon. I musit overcorno greed and have an intensity aljout fiie that enables me to control not only any emotions, but my thoughts as well. That is a tall order, but it is siiH not enough, I must also become a top notch manager - planning, directing, organizing, corurolling and defegating,

sjone of the above has cfianged. If anything, it is mure true nf daytrading than is of daily position trading.

Staying Alive

Preservation, of capital and self, retainifig both my money and my dignity, are prltiie elements of succcsslul daytrading.

I cannot aflord to take a financial or cm.otional beating in the markets. It undermines my self-conlidence, and 1 will not have the courage of my convictions, Without faith, witfiout the courage of conviction, better off not trading at all. Id be better off putting my money into utility stocks.

Its belter to lake a series of small losses 1S150-$2501 than to take a single big fiit. is far less defdoralizing. I realise 1 wont win every day.

Tho losses will always be there. I have to gel used to tfiem. Gut they wont matter if I can stay alive in the markets until a big win ct>mes along.

If taking losses ciifit be a part of my makeup, tfien I dont belong in this business.

Staying in ihe Water

Trading is a business nf staying in the water. I trade, tEikjng small osses and small wins, unii! 1 hit tho big onC; the one I can take to the t)ank.

cant win unless I do stay in the V/aier. 1 cant stay m the, water if ("m demoralised. Continually losing more than I gain will undermine my fatdi. Ill begin to expeririient. Ill change my game plan and Ill become a statistic.

Plan the Work - Work the Plan

One of the oldest cJiches in the world is plan your work - work yotfr plan. Daytrading is a business, therefore I must have a business plan.

Why not just trade iho breakout of the open arid be done with it? That takes very little planning. Why net just trade the S&P after 2 1 when the 3ond market quits mesiny things up? Often there is lots of good action tftcn.

My business plan should include those trades that liave a high probability of being winners.

The Plan

Why go through the exercise of selectiru) trades tfie vay I do? Heres wh.yl My sok>ctJon methods force me to take in the big picture. Tf,e big picture is always a fart of good planning. Dy looking at tfie daily cljart. 1 am abl[j lo get riersocctive. 1 want to [Joint oui that Itie daily chart is GO-75 tirVkOS die magnitude nf die fjvu minute chan, liiL?rween 7:20 AM ald -hOO PM tfiere will be 74 ± five minute bars on tlie cfiart. Its easy to luse the fortts" amung the trees.

Breakouis of daily highs and lows usually carry enough thnrst to see n. througft to a prtifit. It migfu seem that the rrsore niajor a breakout is, the more cf-ance that the ttirust will be sufficient to transport me to a j.irofit. However, tfiat is not necessarily true.

1 Want It My Way

want it rTiy way, or 1 donl want it at all, f dont care if the trade misse<l goes on to make a ni:llton dollars, if it didnt hap[jen the v/ay I wanted it to happen, tfien Ill just miss that one. f miss plenty of super-good iradcs, but at least Im still here to tell about iherrt. 1 want and will take cjiily those trades that are filled my way, according to my specifications. If I give rnarket orders on entry, I wil have too much slippage on boTh ends of the trade. Thats not good. It doesnt fit in with the plan.

The [5lan must allow for slippage, and tosses, and the plan inu.st allow for missed trades. I doTst worry about missing a trade. Tnere afe plenty of trades, niore than 1 could ever fiandle. Wlshfoi thinking ariout n"nssed trades is no more than a manifestaton oi greed. If Idi greedy, 1 wiM lose.

The plan calls lor getting out of at least one coniraci, and [)n.derably two, as soon as 1 see $70 to $100 m profits. Yes, tlie trade might fiave gone on to make $1,000 dollars. However, it rnay also go on to lose $1,000, If I dont 9i:t out at the $70 to S 1 00 tfiEJt the plan calls fur, tfien grectJ fias gotten the betler of (ile and overall Ill lose.

Tfie p!an allows for slippage of time. When J call m my order, the phone isnt always ariswered on tho first ring - or even by the eiglufi ring.

Im long three December gold. Ive just seen my trade hit the S 1 OO level. I lift the phone ard punch the memory button that fias my brokers nuaiber on it, The phone r:ngs once. I see my $100 profit sfirink to SCO on one cuJick tick of the arrow on tfie chart. The ph.one rings a second time. Tlie arrow ticks back up r 10.

The broker picks up the pfione. 1 yell, "Account 1 234, 9:75, 1 5, IMovember, selling one Christmas gold ATTHE MARKET, Iil hold." The market arrow ticks u[) to $120 profit. I fiear the broker say, "Ticket 12Q jells one Deece gold market." The arrow ticks down to + $90. 1 tiear the floor say, "Fred, seM one Deece gold, market," The arrow ticks down to -r 380. 1 hear my broker say, "Account 123 gets it." Tfien I fiear, "OK" My tiioker says. "Thanks." Then lie says "Mcy Joe, you got it, your pr:ce." I say to film, "Thanks.* I say to myself, "Son o* a gun, wfiat a lousy till. I sow it go up to $120 and rdl I made was a lousy $80 less commission."

" > J joninmber, !he [)l,in calls for ti"iis tn ruipjscri. wiifiin The parameiers oi Ihe plan. Al lonst I didnt losg. Ive covered costs, hi a hiisiness, I alwjyys cover costs before I think about profits. "OK< lets see vhat I cnn got out of tfiat secoiid contract."

"m alive, i fiave expectations. That small win starts rne out on the

rigfd foot, anc staying power.

have the courage of my convictions. I now have some he plan is working, and working tlie filaci. I have

pcrsevereff iri staying on track so far.

Why is it so important to get that small win? Because not only does it give me a morale lift, but as stated. It covers expenses. I alvays have to think about covering costs before 1 G?in think about taking profits. It never fails to amaze me fiow many traders fail to realise this basic concept and put It into practice. Even traders who are eminently successful businessmen seem to completely igriore this when they are trading the futures markets.

Since the [>lan calls for having it my way, then of necessity tfiere may be days whan 1 (font trade at all. Will this cause me to change the plan? If Jt doss. ti>en 1 am Isot only greedy, but I would have no cosisistency.

Although it is rare, there are days when 1 dont trade at all because nothing falls vviilnri the parameters of The plan. Of coursa if I arn willing to trade a breakout ol the first corigeslion after the opening, this will rarely fiaiipen.

The larger the time frariie from which Im willing to take my entry signals, the rnore potentia! there is for days in which I dont trade at all. This is a grea. time to take ju an art rnuseum, or the , or an extra round of golf. I could even go fishing. Wiiy? Recause the plan calls for a little R & R now and therv I go ahead, take my wife out shopping. Wfiy else am I trying to a buck? t enjoy the profits 1 rnake in the markets. I dont let them build up any fiigfior ifian I absolutely need for trading. 1 take tfie rest and put it into equities and interest bearing paper.

! dont have to trade every day, do I? If I do, then Ive missed tfie whole point of tradirkj. Trading is for making money - not zombies. If t trade ali day every day, or even part of the day every day, I will fiave lost my tlexifjiliiy. 1 will be using poor discretion, fyly concentration will waiie. My decisivimess will lose its edge, in a word, I will have ijocome a gambler - totally out of conirol. 1 vill have turned into a trading zoriibie, A pair of red, greedy eyes, star.ng at a hoof] tube. Boredom vvill set m. I will have depletec my source of adrenalin. 1 will get nur-iilj. 1 v-j\\\ not act and react the v/ay should, and 1 wili kisE!.

Let mn repeat trie plan lo tfiis [iiointi

" I take entries f;orn major, imermodiate, and tfien minor signals prioritize tliem in ifiat order.

I v/riie dov;n all potential orders. I write them out exactly the way \ will give theni. Some may be repeats of the previous day.

□

set alerts in ar.y way I can. Since m.y software allows it, I set visua and auditile alerts. If I were unable to set ihem on the computer, 1 would watcfi prices on as many markets as t could comfortably watch and stilE function as a trader, At first tfiis migfit bo only one or two. I set my alerts ai 5 or 10 ticks prior to the entry point so f will fove time to react,

I make sure that all entry orders are stop lirnil or stop with limit. If a market gaps open beyond my entry point, 1 wait uniil tomorrov to try again in that market, or until developments today dictate tfiat 1 sfiould keep trying.

° In the event I am not able to use a stop limit or stop with limit order, if the market ruslies throljyh my stop order and filled past my entry point, I live with it. If "fie market hits my entry point and ilien retraces without giving me my

(K)nt sweat it- Im thankful.

If I tliir.k I migfit fiove been filled, {the market fias licked at or beyond my price), then 1 bLjg the dayiigfds out uf my broker until I know for sure if and where I was filled.

° ii Im tilled and the market goes my way. then 1 exit frorii the market on a single contract trade as soon as 1 see $70 to 5100 on the chart, but not until I know fur sure Im in this trade.

If Im trading two contracts, I oxt tfie secor.d one when I see the next 570 to S 100 on the ciiart.

If trading any amount more than two contractSscts, 1 let all or some of them ride, moving my stops up regularly to protect profits.

* 1 take regular rest periods away from the screen and away frojTi trading.

The knovvledge Ive given so far i lar from complete. Th-ere is more to come. There is a specific way I trade the breakouts already mentioned.

In the Ilext chapier, \ will bee in to ex )\ti\i\ die technic ne in detail.

vly desire to make money VljII have become my god. I will have? become a savEd to tradinn.

My ! is to take regular breaks from daytrading. I schedule tfiem arid am sure to take tiiem. 1 take at least one week a month away Irorn tiie screen. I aiso scfiedufe and take 2-3 vacations a year hitally away from al. markets. All diis in addition to taking time away from my trading in ordef io tutor and answer questions from those wanting more lielp. Can 1 earn a livinc daytrading so tew days out of tJie mionth, fewer than 12 months out of a year? esf