A rule of thumb that I cannot stress more is: Do not do "overnights" if you are a daytrader. An overnight is a trade that has not been closed by the end of the trading day and held to the next day.
Why? From my own personal trading and from what I have observed when I was at my prop trading firm, is that overnighting losing daytrading positions (trades where you are already losing your shirt) usually results in bigger losses. It's best to start each day fresh with nothing on the books so you can focus your every attention on what's moving that day.
But as most people know here, I do lots of overnights. And most of them are when I am losing money in them. So why do I do them and preach not doing them? It's because I can afford to lose more money on them (as if I want to) and can stomach the added stress. If you are just starting out and new to daytrading, please do not do overnights. I had my best consistent years trading at Worldco when I stuck to my rule and just sold everything before 4pm EST, reluctantly forcing myself to take losses. Yes some days I wish I had never sold the losing bottom-pick as it got upgraded the next day premarket and I could have saved myself a buck on the position. But OVERALL, I can say with confidence and truth that I have lost considerably more than I have made when overnighting losing stock positions.
Now what about overnighting winning positions? Well for me, if I'm up in them, I'm usually happy to ring the register before 4pm.
- Hubert Tsai