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Day Trading - Portfolio Toolbox
Portfolio Toolbox
Highway 24

Day Trading

I was betwen jobs in 2015 and decided to take a Day Trading course. The focus of the course was to teach you how to trade E-Mini S&P 500 futures which are the most liquid futures in the stock market. While I attended the training and opened and funded my margin account with $5,000, I never actually risked any actual money. Instead, I "paper traded" in a simulator with actual stock market pricing in real-time.

One point of the S&P 500 futures (symbol ES00) is worth $50. You decide if you think the market is going to go up (long) or down (short) and either buy a point for $50 (long) or sell a point for $50 (short). If you bought an ES point and the S&P 500 goes up 10 points, when you sell your ES point you will receive $500. If the S&P 500 instead goes down 10 points, when you sell your ES point, you will need to pay an additonal $450 on top of the $50 you already paid. Conversely, if you sell an ES point (going short) and the S&P 500 goes down 10 points, you will make $500. If you go short and the market goes up 10 points, you will lose an additional $450. Most day traders cash out at the end of the day because the market gaps up or down each morning. Say you were going long and some big news story happened over night that causes the S&P 500 to go down 100 points. In this case, you will lose $5,000 which is all of the money in your margin account and you will be left broke.

I attended real-time trading sessions over the Internet where we monitored the 3-minute candlestick chart for ES00. At the end of each bar, the instructor would talk about the shape of the bar and whether or not we should take action and whether or not we should go long, short or sit tight. Occasionally the instructor would be correct with their prediction, and many times the instructor would be non commital, and sometimes the instructor was wrong. At the end of the day, I felt very stressed knowing that one bad trade could wipe out my margin account. I felt like the amount of money required to be on deposit in the margin account could have been used to simply buy shares in the S&P 500 directly and I wouldn't need to worry about blowing up my margin account. Needless to say, I decided that day trading was not for me.

Lessons Learned

The day trading course was not a total loss however, I did learn some things.

This list isn't intended to teach you how to day trade, it is intended to give you a high level overview and a starting point for concepts to research. I am thinking about applying these concepts to longer term trends to see if it will help me make better trades.