There are so many things I wish I knew before I started day trading stocks. It’s the case for any challenging skill. Once you get to the other side, you look back and see how far you’ve come.
Accomplished traders are like proud parents. Parents have so much valuable information to pass on to the next generation. Successful traders can pass on important lessons, techniques and strategy to aspiring traders.
There are so many “If I only knew…” or “I wish I had…” sentiments that get shared. A lot of it is fantastic advice that ends up being a huge help.
Since I’m at least one child short of shaping the next generation, I will stick to giving traders advice. When I was starting out, I received advice that helped shaped my success. It makes me happy to pay it forward to you now.
So without further ado, here’s my list of 11 things I wish I had known before I started day trading stocks.
Day Trading Stocks #1: It’s a real job
Trading has some big lifestyle advantages. You get to work from home, be your own boss and set a self-paced work schedule. For most people this is the main allure of day trading stocks.
Unfortunately though, most images and marketing fail to convey a simple fact…it’s a real job.
Marketers like to sell the trading dream. They show pictures of fast cars, sleeping in, and relaxing on the beach.
You can do all these things when you’re a successful trader. But the important thing to remember is those are the end results of success, not the creators of it.
Success in trading comes from a disciplined approach. It comes from begin serious about working from home and being your own boss.
A great perspective to take is that if you love the processes of day trading stocks, then it’s work that you’ll love. Incorporate discipline and structure so that you can continue to trade for the long run. Ignore any marketing that promises day trading stocks can provide an effort-free lifestyle.
Day Trading Stocks #2: The order entry is the easy part
One of the most annoying things a trader has to deal with is other people’s perception of what they do. Most assume that all a day trader has to do is stare at a screen and point and click often.
They say things like “I wish my job was as easy as yours.”
It’s a simple mistake to make, because all that an outsider sees a trader do is click buy and sell. They miss all the work that goes into the trading strategy behind the scenes.
“The point-and-click part of trading is the easy part. Strategy is the real work.”
What every trader needs to remember is that pointing and clicking is the easiest part of trading. The real work comes in the form of research, analysis, practice and revision. The hardest part of trading is what gets done when you are not trading at all.
Day Trading Stocks #3: Education is key
Traders come to their screens with a wide variety of education levels. Some have finished high school, some have gone to university. And some may even have become PhD-toting rocket scientists.
The interesting thing about day trading stocks is that you start from zero. It doesn’t matter what education you have coming in. You still need to learn a whole new skill set to trade well.
No matter how smart you are in other areas, becoming humble and coming to the markets with a fresh mind is best.
You can put aside any fears of needing a certain level of education to trade. Sheer determination to learn pays off more than years of formal education.
So how can you get started day trading stocks on the right foot?
There’s an elegant solution for making sure that you learn fast and stay ahead of your day trading game.
Make sure that you focus on putting more effort into the learning side than you put into the act of trading itself. Remember that if you can point and click on a mouse or tap a screen, you have that part covered. The more important part is accelerating your learning.
Day Trading Stocks #4: Never, ever rush a trade
Patience is one of those things that you hear about every day. We all know it’s important. But in some careers it’s more important than others.
Trading is one of those careers.
When you’re day trading stocks, patience is everything.
It can mean the difference between a clean entry and a sloppy mistake. It causes the extra profits gained by waiting for a trade to work out instead of cutting it short.
Never rush an entry, never rush to take profits, never rush to act on a tip, never rush to chase a stock – need I go on?
“Never rush a trade.”
But it’s one thing to know patience is important and another to actually practice it. When you trade, the urge to rush can be overwhelming. How do you counter this?
A simple solution to is to take a deep breath and think about the big picture. Rushing in the moment leads to unwanted mistakes and undesirable results in the long run. Take your time and never rush even though it may feel contrary to the day trader image.
Day Trading Stocks#5: Save money first
Money is an awkward subject. The very fact that day trading deals with money makes this an even more touchy subject among traders.
But the need for money has more to do with perceived need than it does actual necessity. A struggling day trader trying to make rent before the end of the month feels pressure. An accomplished trader trying to make a big mortgage payments feels pressure too.
Both of them are unhealthy traders.
You need money to trade. You also need money to live. What creates problems is when you need too much of your trading money to live.
Wise traders push out the use of their most immediate profits to the future. They make sure they have enough saved up to pay for their lifestyle when they trade.
Make sure you set up your day trading so that you don’t need the money it makes immediately. Have your lifestyle expenses budgeted and planned. It will make your trading easier without pressure of having to pay this month’s bills.
Day Trading Stocks #6: Investing vs. trading
Have you ever wondered about the difference between investing and trading?
Which one is safer?
It’s an important question, and one best answered to end mental friction.
Many traders (myself included) believe that trading and investing are the same thing. What differs is only the timeline.
Trading speeds up the results. Investing slows them down. Neither option is more safe or dangerous than the other but there are some advantages to each.
“The only real difference between day trading and investing is the timeline.”
One advantage of trading is that it speeds up the timeline on knowing your results. A bad investment could take years to show it’s colors whereas a bad trade is immediate. In this way, investing can sometimes hide incompetence.
This is why I prefer trading. I like to see how my strategy is doing right away, not five or ten years in the future.
When you’re day trading stocks, remember your timeline advantage. You get to find out fast if your strategy works or not. And if you do also invest, you can use what you learned in trading to give a better chance of long term success.
Day Trading Stocks #7: Do not chase a trade
Stocks get a lot of attention. There’s a fundamental information, news releases, and financial statements to process. What’s the best way for a trader to make sense of it all?
The answer is to stay technical.
The best traders I know ignore the noise. There is one thing that matters to a seasoned technical day trader. That one thing is price movement.
The things that matter are:
- Where is the price now?
- How did it get here?
- What can we tell about where it is most likely going?
These are the questions that need answering on the path to profits. Too often traders become overwhelmed with the crush of information. They ignore these questions to chase more information overload.
This is unfortunate.
So how can you make sure you don’t fall into this trap?
Ignore the hype around certain stocks, and remember to always consider the price movement characteristics of the stock you are trading above all else.
Day Trading Stocks #8: Psychology dominates
Psychology. For most day traders starting out, this is the most underappreciated part of trading.
Jesse Livermore showed us the importance of psychology in the early 1900’s. Richard Dennis and William Eckhardt did a great experiment in the 80’s proving the same.
“Great strategy can never overcome bad psychology.”
Trading strategies and methodologies are something you can find and use. You can search for a strategy online, or buy one.
This isn’t possible with psychology.
Each trader has to build up their own positive and healthy trader psychology.
Yet there is an easier way than struggling at it alone. There are many training courses and coaches that can help you on the path. Remember that no matter how you work on your psychology make sure you spend the time to master it.
Day Trading Stocks #9: Profit is better than being right
More traders fail because they are unable to understand this one simple fact:
Trading is about executing good decisions over and over again, not about being right.
There is no universal “right” or “wrong.” Your trading account will tell you if you are making money. What that means is that over time you have an edge.
Edges make money over time with winning and losing trades.
So if you make a call that stock XYZ was going to go up, you buy it at 50 and sell it at 52, you did great. When the stock is 10 points lower at 40, don’t mind others or the little voice that says “you were wrong.”
Focus on your profitability more than you focus on how many times you were right.
Day Trading Stocks #10: Connect with other traders
Buying and selling stocks is the backbone of almost everyone’s personal finance.
When you’re a trader, people will want to talk markets with you. It becomes the base of many conversations. Most people will be wondering what your opinion on market direction is.
“Traders benefit from the company of other dedicated traders.”
This can be dangerous territory. As stock day traders, we understand that it’s about method and strategy. We know it’s not about guessing the next big mover.
But the non-traders you are talking to won’t know those things. So stop debating and start profiting. Debates may be fun, but they can be destructive to your mentality and to those you discuss the markets with.
A good trader does not care if they are dead wrong about any particular stock or trade. The important thing is that the process makes money. Get connected with a good trader or group of traders and discuss trading with those who get it.
Day Trading Stocks #11: Love the act more than the money
Love trading more than money. Sound controversial? Sure, I agree.
But consider this. Focusing on money over trading is why many of the would-be-greats of trading stop short. The money isn’t there on a consistent basis right away or they are falling short of their expectations.
An easy remedy for this is to make sure that you love trading. You stay engaged in the moment when you love something. And if you love it, you will stay engaged in your trading whether you make or loose money.
The profits will follow in due course. Make sure you cultivate enjoyment of the act of trading itself. That way, your path to success will feel much shorter.
For more day trading techniques, tools & strategies, check out these articles:
- 8 Common Mistakes To Avoid When Day Trading Forex
- 5 Questions To Ask Before You Start Day Trading For A Living
- Top 5 Important Truths To Know When Day Trading Futures
There you have it: 11 things I wish I had known before I started day trading stocks. Act now to save both time and money day trading stocks.
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