The Day Trader Vs The Scalper

The professional day trader must be able to say: "The facts are in front of me; my analysis of the situation is this; therefore I will do this and this." If the day trader is trading in 100 share lots, throughout a year, he has only to increase his unit to 200, 300, and 500 shares or more, and the results will be tremendous.

The amount of capital or the size of the order is of secondary importance to the day traders question: Can the day trader trade in and out of all kinds of markets and show an average profit over losses, commissions, etc.? If so, the day trader is getting proficient in the art of tape reading. If the day trader can trade with only a small average loss per day, or come out even, he is rapidly getting there.

A day trader who is proficient in tape reading abhors information and follows a definite and thoroughly tested PLAN, which, after months and years of practice, becomes second nature to him. His mind forms habits that operate automatically in guiding his market adventures. Practice will make the day trader just as proficient in forecasting stock market events, but his intuition will be reinforced by logic, reason and analysis.

Here we find the characteristics that distinguish the day trader /tape reader from the scalper. The latter is essentially one who tries to grab a point or two profit "without rhyme or reason"-he don't care how, so long as he gets it.

A scalper will trade on a news tip, a look, a guess, a hearsay, gossip - on what he thinks or what a friend of a friend of friend says. The day trader/tape reader evolves himself into a ‘trading machine’ which takes note of a situation, weighs it, decides upon a course and gives an order. There is no acceleration of the pulse, no nervousness, no hopes or fears concerning his actions. The result produces neither elation nor depression:

The day trader is calm before, during and after the trade.

The Scalper is a car without shocks, bouncing over every little bump in the road with rattling windows, a rickety motion and a strong tendency to swerve into oncoming traffic.

The day trader/tape reader, on the other hand, is like a fine train, which travels smoothly and steadily along the tracks of the tape, acquiring direction and speed from the market engine, and being influenced by nothing else whatever.

Having thus described our ideal tape reader in a general way, let us inquire into some of the prerequisite qualifications. First, he must be absolutely self reliant and self determining. A day trader, whose judgment hangs on the advise or passing words of others will find himself swayed by a thousand outside influences. At critical points his judgment will be useless because he has not been able to exercise his ‘judgment muscles’ – they are weak from inactivity! The professional day trader must be able to say: "The facts are in front of me; my analysis of the situation is this; therefore I will do this and this."

The day trader must also be familiar with the mechanics of the market, so that every little incident affecting prices will be given due weight. The day trader should know the history of earnings of the stocks he is trading and financial condition of the companies in whose stock he is trading; the ways in which large operators accumulate and distribute stocks; the different kinds of markets (bull, bear, sideways, trending, etc.); be able to measure the effect of news and rumors; the day trader must know when and in what stocks it is best to trade and measure the market forces behind them; the day trader must know when to cut a loss (without fear or depression) and take a profit (without pride and puffery).