Day Trading Rules to Help Investors

NEW YORK (TheStreet) -- Apple (AAPL) is one of the most exciting stocks to watch. With or without a current position, I enjoy simply watching the movements. The price action is a combination of powerful fund money positioning and allocating to a set schedule as well as the standard garden variety of fear and greed working their magic.

When people outside the financial industry learn I am a short-term trader or "day-trader," the typical reaction is "Wow, that's risky." My usual response is "It can be -- just like jumping into an airplane and trying to fly it without training. On the other hand, someone with the proper training and a professional mindset can take a 747 off the ground in New York and land it safely in London without a problem." Problems are usually the result of procedures not followed, for pilots and traders.

Like an airline pilot, day traders need to know what they're doing and follow the rules. That should bring you in safely.

Thankfully, it's a lot more difficult for someone to decide one day they are going to be a pilot and start flying the same afternoon. At my local airport where I have taken flying lessons, they will not let you rent an airplane without checking your credentials first. But even as a new student pilot flying solo, the probability of crashing is extremely small.

With day trading, though, the barrier of entry is much lower. If you want to try day trading/investing, there is an endless supply of brokers willing to let you take "the controls" without training and testing to make sure you know what you're doing and understand the risks.

Don't get me wrong, I am not opposed to letting people become "dead money" by choice. After all, it's their money to do with as they please with. I am not suggesting "tests" or other requirements, and in fact, I believe we already have too many needless rules and regulations.

Risk has more to do with skill than luck in flying and investing. People come into my chat room all the time brand-new and knowing little more than which buttons to push to execute a trade. They ask questions such as "What is in play?" or "What are you trading?" and "How can I learn how to trade?" My standard answer is to suggest a couple of books that will bring home how much financial peril they are in by attempting to outsmart Wall Street.

1 2 3 Next › Last »