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Trader
Mark Cook Reveals His Rules for Day-Trading Markets
By
Jim Wyckoff
(Note:
I wrote this story a few years back, when I was a journalist with
FWN.)
A
day trader is a cross between an extrovert and an introvert, with
both characteristics in balance, according to Mark Cook, a veteran
trader from East Sparta, Ohio.
“The
introvert aspect is depicted by the disciplined workaholic with a
reclusive concentration. The extrovert aspect is depicted by an
aggressive, competitive, self-motivated individual striving to be
the best in a selective profession,” said Cook.
Cook
won the 1992 U.S. Investment Championship with a 563% return on his
money. He is a featured speaker at the Telerate Seminars Technical
Analysis Group (TAG 20) conference held here this weekend.
Each
trading day, “I am a creature of habit, going through a daily
ritual before the markets open. I outline in detail all three
possible scenarios for that day: up, down or sideways. I assign a
probability to that scenario and make a written strategy plan, which
has been incorporated into a trading fax service that is devoted to
teaching people how to trade. Thus, a disciplined trading plan is
imposed on me.”
Every
day trader must be “flexible, alert and feisty,” said Cook. The
flexibility must be used to shift from being long to being short “literally
within seconds.” The alertness is used for observing price
movements that are an aberration from the norm, he said. “Feistiness
is the savvy aggressiveness to fight back with a vengeance to regain
money you lost. I don’t know how many times I’ve seen people
lose money in the morning and quit. My most profitable days are when
I lose money in the morning and stay in because I want to get it
back.”
For
12 years, Cook has kept a daily diary of trading patterns he has
observed. He said the diary is “priceless” because price
patterns occur much more frequently than most realize. Regarding
keeping a diary, Cook uses the adage: “If you don’t know
history, you’re doomed to repeat it.”
The
following are Cook’s seven major rules for day trading:
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DO
NOT TRADE THE LAST HOUR OF THE DAY IN THE S&P 500 FUTURES
MARKET. The probabilities of a successful trade diminish in this
timeframe due to the impulsive and reckless buying and selling
by institutions just because they didn’t get their trading
done earlier, said Cook.
-
IF
YOU DON’T LIKE THE TRADE YOU’RE HOLDING, GET OUT.
-
AFTER
TWO HOURS OF TRADING, ASK YOURSELF: “DO I FEEL GOOD ABOUT MY
TRADING TODAY?” Once two hours have passed, Cook says a day
trader should have made at least two, or perhaps more, trades,
“but enough to reviewuate what you have done.” If the trader
feels good about the day’s trading, continue. If not, stop
trading that day.
-
ALL
CYLINDERS OF THE ENGINE MUST BE RUNNING EFFICIENTLY. “Day-trading
is a job, and your paycheck is determined by your ability. You
can only maximize your ability if you have all the information
you need to make trading decisions. “If a piece of equipment
that one uses for trading is not working, stop trading.
-
HAVE
COMPLETE FAITH IN YOUR INDICATORS. “This is a must for
success,” said Cook. “Many times your indicators give you a
buy or sell signal, and you don’t follow it because you don’t
have the confidence the signal is right this time. Successful
day traders believe in their indicators, but also are aware that
nothing is 100% foolproof.”
-
TO
ANYONE WHO ASPIRES TO BECOME A DAY TRADER, OBSERVE THOSE WHO ARE
SUCCESSFUL. “Any information you can procure on the trading
philosophies, mechanics and techniques is well worth your while.”
-
DAY-TRADING
IS A LONG-TERM COMMITMENT. “I fervently believe it takes
several years to become a true professional,” said Cook.
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