If you are buying a house, three most important pieces of advice anyone can give you are: "location, location, location!" With Investing they should be: "preservation, preservation, preservation!" Of capital, that is. This is best illustrated with percentages.

As an example, you may buy any number of stocks in a $10,000 portfolio. Without stops, if you lose 20% of value of your $10,000 (i.e. $2,000) you will need to make 25% on remainder to get back to where you started. Likewise, if you lose 50% and are left with $5,000 you now need to make 100% profit to get back to where you started. How many people make 25% in a year? Not many! How many people double their money in a year? Even fewer!

You might think you won't lose 50% of your investment, but it does happen, and a lot more regularly than any of us care to admit. So, always use stops.

Once you have established a buy point, you can work out where to place initial stop. There are several ways of doing this:

1) Place stop one tick below most recent resistance level or swing low.

2) Use a fixed percentage, e.g. 8%, 10%, 12%.

Day Trading isn't easy, but with experience, dedication, self- control and hard work, you *can* become a successful day trader.

1. How to Treat Gap Openings. A gap up or gap down open is an emotional move, and it often will reverse course and turn in to "trap open". Gaps that are less than 4 points on SP Future tend to get filled in same day, especially Tuesday through Thursday. Turns will occur within 20 to 40 minutes after open. A trader must be on lookout for a reversal as soon as early momentum is lost.

A gap into a good support /resistance zone is almost always a good "fade" - with stops no more than 1 point on other side of support /resistance zone. (A "fade" is simply entering a position opposite of direction of gap. If market gapped down, a "fade" would be entering a long position (buying) in to selloff.)

2. When Market Moves Against You, When Do You Exit a Trade?

The way I trade, I exit as quickly as possible. There's no sense in waiting around for your "stop-loss" to get triggered when perceived edge is gone. I like to stay in control of my trades, and if market doesn’t do as anticipated, I don't wait for my stop to get hit. When there is no longer a high probability situation, exit and take a second look.

3. When Are The Best Times of Day to be Trading?

For me, best times of day for trading are first hour and last 2 hours. Here's an old rule of thumb (and this used to work like clockwork in "old days", and although it has diminished a bit, it still happens):