This article shows you one of the many techniques employed by professional traders when executing their trading strategies. There are many trading methods, systems, techniques and strategies used by professional traders -- from basic moving average-based methods to high-speed, high-frequency quantitative trading strategies. Trading is trading. Whether the instrument is futures, Forex, indices, commodities, interest rates or individual stocks that make up the stock market; there are common elements to all of them. One common element is how professional traders trade these separate instruments. Because of this it is possible to identify the techniques professional traders employ to boost your own success in trading. The most significant goal that every trader is continually aiming for is reduced risk and increased reward on every trade. This leads to the following... Professional Traders Trade COUNTER-TREND This may seemingly go against what you already know about trading -- that you "must" trade with-the-trend to have any chance of success. Now, trading just plain counter-trend would kill any traders' account in no time -- professional trader or not. This is known as picking-tops and picking-bottoms (link to another article perhaps). Professional traders will generally have a trading strategy, method or system that underlies the actual taking of trades -- they are not just rolling a dice or trading when they feel like it. There is structure. There are essentially two types of market scenario traders must deal with: #1 - Ranging #2 - Trending Professional traders treat #1 -- ranging markets -- in various ways. Some will aim to only trade ranging markets, some will aim to stay away from ranging markets and the rest will try to adapt to what the market is throwing at them. Figuring out when a market is likely to range, and likely to continue ranging, is larger in scope than is possible to talk about here. But simply put, if the market is ranging, and you're trading counter-trend, it is in fact very easy to make money. The focus of this article is #2 -- trending markets -- and the-how-and-the-why professional traders trade counter-trend when a market is trending. Going back to what is the common goal among traders -- reduced-risk and increased-reward on every trade -- this is the modus operandi, or underlying goal in-mind while trading. Markets don't trend in a straight line. They flow. They move, they come back a bit then they move again. Even when the trend is identified it is still about getting the risk down and the reward up. Going back to the original premise of, 'Professional traders trade counter-trend'. The risk is generally not worth it unless the trader gets a bargain price. In other words, the potential risk must be small and the potential gain must be large. If the market is in an uptrend, the trader will not try to fight it by selling it. He will trade, what can be regarded as counter-trend, by buying when the price goes down -- anticipating that the down-move is temporary before the trend resumes. The same goes for the market in a downtrend. He will trade this in a counter-trend manner by selling when the market makes a rise - anticipating the down-move to continue. This may sound very simple -- and it is. But there is something more to be read into it. So the professionals are essentially just buying 'dips' and selling 'rallies' -- that's old ancient trading "advice". Here Is The Secret... The professionals will never be caught buying-the-high or selling-the-low. The amateur trader is seduced by seeing charts where the market makes a new high, keeps going and never looks back; this looks like a no-risk trade. And it was -- on THAT trade. What the amateur misses is the many times a new high was made and the market came right back. The professional trader is reluctant to "pay-up". So he misses the one "no-risk" trade where the market makes a new-high and keeps going. So what? He never missed all the low-risk bargains each time the market pulled back. This article was not about a strategy in the typical sense. But to become a professional trader, you must start thinking like a professional trader. Most professional traders do not have "fancy", "secret" systems. They see the market for what it really is. Yes, they know things that amateurs do not know. Yes, they do things that amateurs don't do. And yes, these things can be learned. James Macdonald REAL Market Trading Learn how to trade at a professional level by going to http://realmarkettrading.com/REAL-Trading-Course.html

The most important rule concerning day trading of stocks in the United States is called the Pattern Day Trader (PDT) rule. Approved by the SEC, this rule states that you can only perform three day trades within a rolling five-business-day period if you have less than $25,000 in a cash or margin account. However, if you have more than $25,000 in a margin account, there is no legal limit on the number of day trades you may make.

Definition of Day Trading
A day trade is the buying and selling (or shorting and covering) of the same security on the same day.

Penalty for Violating the Rule
You will be flagged as a Pattern Day Trader by the brokerage for that account. Your account will be frozen (no new positions can be added) for 90 days or until you deposit enough cash to get your account value above the $25,000 minimum level, whichever comes sooner. Some brokerages will warn you ahead of time when you are about to be flagged as a PDT, while others will not, so be careful if you trade a lot!

If you violated this rule accidentally and you have no intentions of being a day trader, you have the option of informing your brokerage of the situation and they have the ability to remove the PDT flag from your account.

Why Do They Have This Rule?
The goal of this rule is to protect beginners and those with little cash from participating in risky trading activities that could lead to significant losses in a small amount of time.

Example 1: Safe from PDT Rule
1. Monday: Buy and Sell MSFT
2. Tuesday: Buy and Sell GOOG
3. Wednesday: Buy and Sell F
4. Next Monday: Buy and Sell GM
Result: 3 trades in a 5-day period

Example 2: Violation of PDT Rule
1. Thursday: Buy and Sell MSFT
2. Friday: Buy and Sell GOOG
3. Monday: Buy and Sell F
4. Tuesday: Buy and Sell GM
Result: 4 trades in a 5-day period

Three Days for Settlement
There are several other federal regulations that affect day trading, and the settlement period is one of them. Whenever you buy or sell a position, it takes up to three days for the trade to "settle." This is similar to a check taking a few days to clear at your bank. In the first three days after a sale, your brokerage may or may not allow you to trade using the money from that sale, since it has not settled yet. This restriction only applies to cash accounts though. The way to get around this problem is to not spend all of your money on one trade. This will make sure you always have some settled cash to trade with. If you have a margin account, your brokerage will lend you the money during the settlement period so that you don't have to wait before you trade again.

Nicholas Swezey is the creator of the free stock market game on his site, http://www.HowTheMarketWorks.com.