Many people have asked me about my feelings on taking overnight positions and being a day trader. They are very surprised when I tell them that I can’t afford to have feelings when I trade. Instinct is one thing, but being emotional over a position is the kiss of death for me. As a day trader, I am to some degree lessening my risk by only trading during market hours. I can go home at night and know that nothing will happen in the world that can change my P&L at that point in time. If I took home a few thousand shares of Lehman Brothers a month or so ago I probably would have walked in front of bus on my way Starbucks in the morning and put myself out of the misery. Taking overnight positions can be a very risky place to be and as such, may make the potential return worth it, if you choose wisely.
Usually when I take an overnight position, its not a ‘slap it on’ at the end of the day proposition, I may have been in and out of stock for a good part of the day, and have built some size on my position in this stock. If by the approach of the close I am up considerably in a stock and it is still showing strength, I may choose to take all or part of it overnight for an expected gap up in morning. I may also sell some to lock in some profit and lessen my risk depending on market conditions and my own instinct. There I said that word again, but probably a better statement would be experience. Newbie day traders in online trading, may want gain some experience and book some profits before making overnight trading part of their repertoire. When I take an overnight position, I usually already ready have a profit with that stock, so in essence I am playing with house money.