Principles of Successful Trading:

1. Study - the first discipline of trading. Beginning day traders are usually advised to follow a few stocks closely, understand them well and trade them continuously to that they learn who the dominant market makers are and what they do; how they react to changes in the S&P futures, the Dow, the NASDAQ, and other major indices; and how fundamental news about earnings, regulatory approvals, interest rates  and the like translates into the stock price.

2. Technical and Fundamental Analysis - Fundamental facts are those that underlie and eventually determine prices. They include supply, demand, economic conditions, competitiveness, etc. Technical facts are price movements, seen as an expression of market psychology. Technicians believe that market prices move in repetitive patterns, a belief that implies that the analyst who correctly identifies the pattern in which prices are moving can accurately predict the next move.

3. Useful Practices - 
         a. Paper Trading - Opponents of paper trading say that because the paper trader is not risking real money, he or she does not learn to cope with the gut-wrenching fear of loss that makes live trading so challenging.
         b. Defining Risk Tolerance - Limiting risk means limiting potential gains, but it also means limiting potential losses, and for beginners, small gains are undoubtedly preferable to large losses.
         c. Loss Control - With only a small amount of capital at risk, the new trader should establish a stop-point loss on each trade and make no exceptions or excuses about getting out of every trade at every point.
         d. Schedule Homework - Every trader should develop a daily schedule that allows at least an hour before the open or after the close of the market for concentrated study.
         e. Diary - It is advisable to keep a trading diary, a personal performance record that includes general observations on the market, the thinking that led to each trade, an assessment of how each trade worked, etc.
         f. Managing Expectations - All of this analysis and paperwork will take much of the thrill out of trading. A good trader must be able to look at the market conditions and decide where prices are going without being influenced by hope or fear.
         g. Managing Profits - Holding winners is almost as important as cutting losers. It makes more sense to take a small gain than to ride a stock up only to ride it back down again. But if conditions still favor being long, it makes more sense to stay with the position until conditions justify selling then to make a small profit even smaller by the amount of the sales commission.

Extreme Investing: Market Information

1. NASDAQ screens - offers several levels of detail about stock trading:
         a. Level I - includes information about the company's name, stock symbol, direction of the last price move, how far the stock has moved during the day, the quantity of shares that changed hands at the last sale, the high and low for the day, the volume of shares traded at this pint in the day, the current best bid and offer prices, and the previous day's closing price.
         b. Level II - more detailed than Level I, identifying every market maker and ECN presently in the market with a bid or offer for the stock. Each market maker or ECN is identified by an acronym. After the acronym comes the market maker's or ECN's bid or offer price, followed by an indication of the quantity desired or offered for sale. NASDAQ Level II information is now widely available through day-trading brokerage firms and online financial information services.

The Trend is Your Friend, and Other Truisms of the Day-Trading Life

1. The Trend is Your Friend - Higher highs and higher lows define an up trend; lower lows and lower highs define a down trend. Day traders seek to get into stocks on up trends when the prices pull back and get out when they approach new highs.

2. Get Out When You Can, Not When You Have To - Sell out of the long position, or buy back the short, when the opportunity still looks good enough that someone is willing to take the side you are leaving. Don't wait until you see clearly that there is no money to be made in the stock. You won't be the only one to notice.

3. Don't Swing For The Fences - Small, consistent profits add up faster than big, occasional ones.

4. The Ticker is Your Music - Don't dance when the music isn't playing; don't try to trade when the market isn't moving.

5. Know Where They've Been to Know Where They're Going - Pay close attention to where stocks have been trading within the past five minutes, the past hour, the past day, week, month, six months. Know them cold.

6. The Market Always Tries to Close a Gap - Expect prices to move in the opposite direction - up when they've gapped down, down when they've gapped up.

7. Buy Stocks That are Strong in a Weak Market; Short Stocks That Are Weak in a Strong Market - They'll be the first to move sharply when the market turns.

8. The Best Place to Be a Buyer is on a Low or a Pullback - Even when stocks are going up, there will often be a chance to buy at a relatively good price.

9. Follow the Path of Least Resistance - Don't buck the market.

10. Trade the Truth - Base trades on what is happening, not on what you wish or hope.

11. Know When to Get Small - When things are going badly, trade less volume and fewer positions.

12. Ease In, and Ease Out - Going slowly and building positions gradually will naturally impose a discipline tending to keep you small when things are bad.