Trading in the United States is different in some important ways from trading in Australia. Despite this, Australians now have the opportunity to day-trade in the way that Abell takes for granted. The expansion of the Internet has delivered these trading tools. Some of these include network systems which use the Internet, operated by William Noall and others, and the web site based brokerage systems of Sanfords, E-Trade and others.

A network system uses the Internet to connect you desktop computer with the software run by the broker. You essentially become part of an active network. The web site based systems use the Internet to deliver the information on a series of web pages which you view one at a time. Although they operate slightly differently, the layout and features of both systems are very similar.

These live data feeds and live order placement should not be confused with the rash of electronic order and portfolio management systems being offered by some brokerages. Where e-mail is used mainly to replace verbal phone orders the advance in order execution speed and trading is marginal, although brokerage charges may be much lower. Enquire carefully to find out just how your order is handled. The results can be surprising. The most successful Internet systems now use some form of Straight Through Processing where your order goes directly to the Stock Exchange Trading System.

An alternative source of market data is from a broadcast system. This broadcasts market data via satellite, or a TV signal. The data stream is directed into your desktop computer and converted into a live display of data, watch lists, tickers and real time charting. This area is dominated by MarketCast and has the advantage of not locking the trader into a specific broker in return for data, and also not consuming lots of Internet time. Some traders use the broadcast system to monitor open trades and then turn to their Internet screen to place buy or sell orders.

These low costs are attractive encouraging some traders to forget that while day-trading rewards in reality are often not much different from position trading, the risks are magnified and the temptation to trade can be enticing beyond all reason. As Abell has discussed, day-trading is not for everyone. It calls for specific trading and psychological skills.

In contrast, the day-trader looks for market 'set-ups' - price activity indicative of immediate price gains within a few hours, or days at the most. His exit signals are often generated by price activity and momentum, so constant monitoring of the open position is required. A price alert feature assists, but does not replace the need for visual monitoring. For the day-trader the real time course of trades screen is his primary tool when it comes to trade execution. This shows the momentum he is trading, so he cannot afford to be distracted by a large portfolio of interesting, but ultimately irrelevant, stocks. The day-trader has a tighter focus because he must jam in more concentrated activity but at the same time remain in analytical control.

Internet data does not replace end of day data analysis, nor end of day charting. A conventional technical analysis of the market using a charting program such as Metastock, Ezy Chart, or Super Charts will identify the likely day-trading candidates for the following day.

THE PORTFOLIO CORE - The Watch List

As a day-trader you will already have identified the stocks, or financial instruments such as warrants or options, that you wish to monitor. Some day-traders follow a select group of high volume blue chip stocks, such as BHP, Westpac, Commonwealth Bank, Coles Myer and Telstra. Others are more opportunistic and often their initial decision is made on the basis of analysis of end of day data or in anticipation of news releases. Most watch screens are limited to 50 instruments in the portfolio or watch list, but day-traders will follow perhaps 5 or 10 each day. Individual instruments in the portfolio can be changed at any time and take only a few seconds to update. Many sites search for the fastest moving issues on the day and display these rankings in real time.

PORTFOLIO OVERVIEW

The I-DEAL watch list window reflects the portfolio choices. This is where we track price activity and is the primary window for the day-trader. As with any spreadsheet display, the size of each column can be adjusted to suit the users needs. However, the display cannot be window paned as with an Excel spreadsheet. A web page display cannot be altered in this way and sometimes this information is spread over several different web pages. The comments below use the networked I-DEAL system but the same information can be obtained from brokerage web pages such as those run by Sanfords and E-Trade.

The default screen colours are used to show price increases in green, price decreases in red and unchanged prices in white. This colour scheme is used consistently, and although it can be altered to suit user requirements, it is very suitable in its default format.

Column 3 shows the current bid for the instrument. Column 4 shows the current ask. Column 5 lists the last traded price and the next column, the volume traded for the day.

These are particularly useful figures for the day-trader, but they are also the most sought after figures for position traders who are managing a current entry or exit. Experienced day-traders read this 'tape' of activity for clues about the direction of trade, its speed, and its strength.

It is these relationships shown in this Instruments window that are of most interest to the day-trader. It is from this window that the day-trader selects the particular view of the market that is most useful. Perhaps the most distracting is the Real-time ticker.

MONITORING THE MARKET - Real-time Ticker

Tickers come in three styles. The first shows only those stocks you are following on the watch list. The second shows all trades and is similar to the ticker on the CNBC-Asia television screen. The third shows all trades, plus price and volume details. An example of the last two styles, taken from Sanfords and Market cast.

These screens hammer away at your trading discipline, resolution and willpower. If you are going to feed the meter like a slot machine, this is where it starts.

Visually, this is the day-traders equivalent to standing on the floor. As each order is processed it appears on the right hand side of the window.

TRACKING A TRADE ENTRY OR EXIT - Market Depth

The day-trader thrives where the action is most frenetic, but entering a trade merely using this criteria is no guarantee of success. The trader needs to know what lies ahead, and behind and the Market Depth screen provides this information.

Some Internet depth of market screens show only consolidated orders, or level 2 depth of market. This is displayed as 12 buyers at $1.20 who want a total of 150,000 shares.

The I-DEAL network system shows level 3 data. This displays every individual order at each price level. Trades are matched at the top of the screen. The left hand columns show the bid. This is split into the size of each individual order and the price each individual is prepared to pay. In Figure 4 we see two buyers at $31.06, one buyer at $31.05 and again at $31.02, followed by two buyers at $31.00.

If we are a buyer, this information, Level 2 or Level 3, allows us to identify exactly where our order is in the line-up. As a day-trader, we can use this information to move ahead of the competition if required.

On the selling side, the same type of information is displayed and is used to establish sell points. Day-traders can place sell orders at pre-determined profit points and pull them from the market before execution if they feel better sell prices are achievable. This market depth screen allows the more careful placement and management of orders.

MONITORING A TRADE OPPORTUNITY

The actual purchase of shares is not the end of the process for the day-trader. Where the position trader can relax when his buy order is filled because he is unlikely to be selling for a few days at least, the day-trader treats the order fill as a signal for increased monitoring.

This is quite different from the three and five minute charts Abell refers to. Here the price high, low and close for that period is charted. The nuances of these charts are discussed more fully in TRADING TACTICS. The charting module of the MarketCast broadcast data system allows traders this flexibility. Several Internet providers now dynamically linked to charting software programs such as Trade Station and Metastock Pro which have the ability to read the data stream and create this style of chart.

REAL TIME CHART

Not everyone is comfortable with numbers on the screen, or a parade of ticker tape. Many traders, and day-traders in particular, rely on a chart plot of price activity for understanding the market more rapidly. Real-time charting delivers on these wishes.

Many Internet real time charts are tick charts. They show the impact of every trade. Some Internet providers, such as OTS, include dynamic links to Metastock Pro. These are delivered via individual web pages. Heavy web traffic can cause slow loading and updating.

One of the more flexible real time charting links is provided by MarketCast. Because the data is already on your computer the charts are constructed by your machine. This makes for very fast charting and display. Flexibility includes choices of tick, 1 minute, 5 minute and 15 minutes tick charts. Around 40 indicators are available and these are calculated and displayed quickly as the data flow does not depend on ISP line quality as with the Internet. As this system is not tied to the web it is easy to display multiple live charts with different combinations of indicators. The screen display in Figure 6 is taken from MarketCast.

DAY TRADERS WINDOW ON THE MARKET

For the day-trader, the networked window combination screen display used for monitoring an open day-trade as shown. This style of screen is similar to a broadcast screen. They include the Real-time Graph, the Instruments screen displaying just the open position, and the Market Depth window. The Real-time Ticker provides a feel for the overall market, and for his open position in particular. If his trades are based on breaking news, then a news service window will be included across the bottom. In a fast moving day-trade there is not the concentration room available for more information on the screen.

ORDER EXECUTION - Placing orders

The value of all this information at your fingertips would be destroyed by slow order execution. Discount brokerage can, and does, cost day traders a lot of money through slow trade execution. It is important to talk to your brokerage and establish just how your order is handled. If the orders are not part of a straight through processing order stream, or a system that is very similar, then you are at a disadvantage as a day trader. The US does provide a benchmark for this and the Internet and Day Traders link on  www.guppytraders.com  provides updated information on average order execution speeds for many US brokers. It provides a benchmark comparison for Australian discount and Internet brokerages.

TRADER EXECUTION

No matter how you look at it, day-trading is different. For the first time and at a reasonable cost Australian private day-traders have the tools that were once only available to brokers, institutional propriety traders and floor traders. This is hunting in a very dangerous jungle and although these systems make it possible, they will not protect you. A thorough understanding of the Day-traders Advantage will assist but when you day-trade you are very much on your own.