A Successful Investor Must Know When To Stop Day Trading Stocks (part 1)

It is impossible to fix a rule governing the amount of profit the operator should accept while day trading stocks. In a general way, there should be no limit set as to the profits that can be made from day trading stocks. A deal, when entered, may look as though it would yield three or four points, but if the strength increases with the advance it may run ten points before there is any sign of halt.

We wish our readers to bear fully in mind that these recommendations and suggestions are not to be considered final or inflexible when it comes to day trading stocks. It is not our aim to assume the role of an oracle. Rather, we are reasoning things out on paper, and as we progress in these studies and apply these tentative rules to the tape, in actual or paper trading, you probably have occasion to modify some of our conclusions.

A tape reader must close while day trading stocks:
(1) When the tape tells him to close;
(2) When his stop is caught;
(3) When his position is not clear;
(4) When he has a large or satisfactory profit and wishes to utilize those funds for better opportunities day trading stocks.

The first and most important reason for closing a trade is: The tape says so. This indication may appear in various forms. Assuming that one is day trading stocks in a Leader stock, the warning may come in the stock itself.

Within the recording of sales, there runs the fine silken thread of the trend. It is clearly distinguishable to one sufficiently versed in the art of day trading stocks, and, for reasons previously explained, is most readily observed in the leaders.

So, when one is short of Union Pacific and this thread suddenly indicates that the market has turned upward, it’s foolish to remain short. Not only must one cover quickly, but if the power of the movement is sufficient to warrant the risk, the operator must go long. In a day trading stocks market of sufficient breadth and swing, the tape reader will find that when it is time to close a trade, it is usually time to reverse his position. One must have the flexibility of whalebone, and entertain no rigid opinion while day trading stocks.

He must obey the tape implicitly. The indication to close a trade may come from another stock, several stocks or the general day trading stocks market. For example, on the day of the Supreme Court decision in Consolidated Gas, suppose the operator was long of Union Pacific at 11 o'clock, having paid therefor182 ¾. Between 11 and 12 o'clock Union rallied to 183 1/2, and Reading, which was more active, to 144. Just before, and immediately after, the noon hour, tremendous transactions took place in Reading, over 50,000 shares changing hands within three-quarters of a point.

These may have been largely wash sales, accompanied by inside selling; it is impossible to tell. If they were not, the inference is that considerable buying power developed in Reading at this level and was met by selling heavy enough to supply all bidders and prevent the stock advancing above 144 3/8.