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if you know nothing about day trading, you are at the right place.

Day Trading Basics

The basics of day trading are actually quite simple. Common questions such as "What is a stock", "What is a 'ticker symbol'?," "What is margin" and "What is shorting" are easily answered. Behind all these basic ideas and themes is the meaning of the "bid and the ask". Let's take a look at order types, and then how these relate to the bid and ask.

Order Types

The main types are-:

Market Order - is an order to buy or sell a stock at the best bid or ask. A market order WILL get exercised for you fast, but you might not like the price you get! Of course, by then you actually have no choice but to take the price and hope your trade is in the right direction (WITH the market!). If the market is moving fast and you simply HAVE to get in, sometimes a market order is the only way. The floor traders love market orders from 'the paper' (i.e.off-pit traders, the 'little guys' trading from PCs at home) because this is how they generally make most of their money - nibbling the edge here and there. Most day traders yry to use market orders as little as possible. With a day trading spread betting account, market orders are as dangerous as on a standard brokerage account. The advantage is that you WILL get a fill, even if the price sucks.

Limit Order - an order to buy or sell a stock at a price you specify (or better). This is the order of choice for day traders. If you are afraid your order might not get filled and are tempted to use a market order instead, remember this golden rule, from Trader Jack (rest his soul) - "There are 2 things you should never chase - a bus and the market". It is usually more important that you get the trade on at the right price, than that you get on at all. If you buy it too dearly, or sell it too cheap, chances are you will regret it almost immediately.You will also be amazed as you start to realise that intrabar volatility can often cause excrutiating financial pain to day traders who use anything but day trading limit orders.

Stop Order - an order that becomes a market order when a specified price (the stop price) is reached. Used mostly to protect a position from incurring larger than acceptable losses should the trade start to go the wrong way. A "buy stop" order is placed above the current price and a "sell stop" order is placed below the current price. Until you are VERY experienced, NEVER open a position without also creating a stop to protect yourself. Even trading masters use stops, to ignore this rule isn't remotely brave, it is simply foolish.

How to read a Stock Quote

You have probably seen trading stock information from various financial websites on the net that look a little like this:-

Items like 'Open' or 'Prev Cls' are rather obvious, but what does the rest of it mean?

• Last Trade: This is the price and time of the last recorded trade in this security.
• Day's Range: The distance between the high and the low for the day.
• 52 wk Range: The difference between the High and low over the course of the last year.
• Change: How much the security has risen or fallen since yesterday's close.
• Bid: The best current offer to BUY the security.
• Ask: The best current offer to SELL the security.
• EPS: Earnings Per Share.
• P/E: The price to Earnings Ratio.
• Prev Cls: The previous close.
• Open: At what price the security opened this morning.
• Mkt Cap: The Market Capitalisation of the security.
• Volume: The number of shares of this security that were traded this session.
• Avg Vol: The average volume traded per session.
• Div/Shr: The dividend paid per share.
• Div Date: The date a dividend will be paid.
• Ex Div: The date upon which a dividend will no longer be paid.
• Yield: The dividend divided by last trade price.

As a day trader the meaning of these terms should be second nature to you. You should be aware of these figures automatically for all the securities you are interested in (and believe us, you MUST specialise in a sector or type of security).

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