Life of a Day Trader

Vanita Jones reveals the promise and peril of online investing

to fall faster than they rise."

When stocks fall, one strategy used by day traders is the "Lizard Reversal." Traders watch for a stock that is going down all day, but at the very end it closes up. Normally, you’d expect it to pop up the next day.

Jones also describes a technique known as "1-2-3-4." The theory behind it is that if a stock goes up for three consecutive days, you can expect that on the fourth day, it’ll most likely do the reverse. The opposite holds true as well, according to this theory: if a stock has fallen for three days in a row, the odds are that it’ll rebound during the fourth trading session.

For all the theory behind these strategies, Jones says they won’t matter much if you don’t have the conviction to stick with your stock picks. "You can get bogged down in all [the strategies] when the main thing to focus on is discipline," she says. To succeed, a day trader must consider: "How much am I willing to risk on a particular trade and stick to that stra-tegy no matter what?" In fact, experts tell traders to limit themselves to a maximum loss of half a point.

You should also focus on an entry point, Jones advises. "Think about where you want to get into [a stock]," she says. And if you’re attentively charting a stock’s performance over time, "you can see where you should exit," Jones adds.

One final caveat from Jones: trade only when you have a clear head. Most of her losses occurred in the month of September, when things were turbulent throughout the globe. "My biggest mistake was to trade when emotionally and mentally I was not in the game," she says. "I was just going through the motions."

One of the ironies about Jones is that she became a day trader at all. She’s not a person who is comfortable with taking big risks. "They always say that when you trade, it’s like looking in a mirror-and that’s true.You really learn about who you are," Jones says. "In my case, I’ve always been a cheapo. I certainly didn’t want to lose money, and I really am not risk tolerant," she confides.

Her risk-averse nature worked for and against her. "For, because my losses were usually [contained to] half a point; against, because I didn’t let my winners run," she says. "Oftentimes I was making the right selections, but I didn’t have the patience or tolerance to stick with them. That’s how I ended up spending more in commissions than I was making." On a given day, Jones could make or lose $500 or $1,000. In total, she lost $18,630. Of that total, $15,040 was in commissions and execution expenses.

Jones traded through Westwood Trading. She also had an account with the firm that allowed her to buy stocks on

Pages: 1 2 3 4 5 6