Any good list of day trading tips need to address an important fact:
If doctors began their careers like most traders, patients would be in trouble. In fact the average patient would have a 5% chance of leaving the hospital alive.
There are many similarities between the careers of trading of medicine. Both need you to be professional and disciplined and get proper training to see success. Knowing this, you would expect traders to approach the markets with caution.
Yet most traders do not follow this path. The majority jump in with unearned bravado. They are as dangerous as an untrained medical enthusiast with a scalpel yelling “I know how to cut, I know how to cut!”
Nobody bleeds to death in trading, but financial losses can hurt. They can hurt a lot.
Let’s prevent this pain from ever happening to you. There is a better way to start on the path to being a disciplined professional. Follow these 10 day trading tips to success in the markets.
Day Trading Tips #1: Put the spotlight on your strategy
There is a common yet mistaken belief that many novice and intermediate traders hold. This false belief is they think that their personal reaction time matters.
While this was the case decades ago (around the time VHS tapes were popular) it is false in today’s trading world. Computers and technology have closed the gap. The speed of a traders’ reaction time will never be able to compete.
Real trading superiority now relies on strategy and planning. This means you need a tried and true process for getting in and out of market positions to succeed.
Never focus your precious energy on improving your reaction times. Rather, focus on improving your plan of reaction.
Great strategy methods and planning are what lead to consistent profits over time. An easy way to remember this is “research over reaction time.”
Day Trading Tips #2: Keep a schedule for superior results
Trading is like exercise. In the gym those who only dabble at exercise get lackluster results. In trading, it is the same.
Sentiments like “I’ll do it when I have the time” are a recipe for disaster. If you treat trading like an unimportant side-hobby, you won’t see true results. Trading success takes dedication.
It’s easy to start and stop a career like trading. There is no one but you keeping yourself accountable. No professor will be angry you didn’t show up for class. No boss will come knocking on your door or calling your phone.
The real challenge as traders is that we have to keep ourselves accountable to our success. We are running the show, so we need to realize that we need to show up for ourselves.
“Plan your trading day to stay consistent with your success.”
You don’t need hours and hours each day to succeed but you do need a planned chunk of time, even if it’s only 30 minutes a day. Consistency always trumps sporadic bursts. Schedule in whatever time you can spend each day trading and stick to it.
Day Trading Tips #3: Bet small for large returns
A huge psychology landmine for traders is looking for the “one big break”. This landmine is easy to identify, and it’s characterized by a few common trader beliefs.
These beliefs can be sentiments like:
- “This one trade could make my entire year”
- “I should have bet bigger on that winner”
- “If I can find that one big, perfect trade I’ll have it made.”
It’s dangerous to think this way and in the long run it can destroy your profit potential.
Betting small is the simple cure to this psychological mistake.
Another way to look at it is to realized that being a good trader means being good at the act of trading. A good trader can perform well over and over again so they don’t need to look for a single chance to win.
Think of it this way. Let’s say on each trade you only risk 1% of your total trading account size. That means it would take you an long string of consecutive losses to blow up your account.
Contrast this with traders who like to “bet big on sure winners”. They risk a large part of their account on a single trade. Only a few losing trades could take them out of the markets forever.
Trading skill is about practicing the right actions, no matter the outcome. There are no guarantees on any one trade so the best way to stay in the game is to bet small. Small bets and skilled action lead to success over the long run.
Day Trading Tips #4: Pick just one market to start
What kind of markets and instruments can you trade?
Just some of the choices are:
- Big-cap stocks
- Penny stocks
- Commodity futures
- Options
- Forex pairs
- Binary options
- The technology sector
- CFDs
- ETFs
- …And the list goes on.
The variety of financial products is greater than the selection at Baskin Robins. Being a jack of all trades (pun intended) is a recipe for disaster. It is too much for any one trader to be an expert at every available product.
Pave the path to success by narrowing down what you are going to trade. There are traders who excel in each category. There are very few who excel in them all.
“The more you focus, the greater your mastery of a market.”
The time to branch into a new market is only once you have mastered the current one you have chosen to practice. A career in trading can last a lifetime. That’s plenty of time to experience each market but make sure you don’t jump around before you get good at each one.
Day Trading Tips #5: Use a simulator
Struggling traders often miss their chance for proper practice. They do this because they constrain themselves with their small account size. They become fearful and end up dabbling here and there.
This dabbling prevents the much-needed training every trader needs to be great.
What if you can’t afford a large account size to start out? No problem! You can use the traders’ secret weapon – a simulated trading platform.
In a simulated situation, you can make your account size anything you like. This allows you the flexibility to try things out with a larger account size. This practice will serve you in the trading future you are creating.
Day Trading Tips #6: Coin flips lesson
Losing trades are an unavoidable element of trading. It’s part of the business.
Some of the best advice I ever got was:
“Just think of losses as the cost of getting to the profitable trades.”
“Losses are your cost of doing business as a trader. Accept them.”
Imagine a jar half filled with pennies that represent your trading account.
Flip a coin:
Heads = a winning trade… add two pennies the jar.
Tails = a losing trade… remove one penny.
Keep doing this and over time the jar will overflow. We don’t try to avoid the Tails in the coin flipping example. We focus on flipping the coin. Losses are important part of the successful trader’s operations.
Day Trading Tips #7: Fight the feelings
There are a lot of emotions in the supercharged arena of trading. Yet 99% of these feeling work against the successful trader. The desire to win, the desire not to lose, the desire to show off, greed, fear… the list is endless.
Top traders keep their feelings in check. They deploy their trading strategies in a calm and calculated manner. The accomplished trader is only ever disappointed about one thing. That one thing is if they strayed from their trading plan and strategy.
Practice controlling your emotions while trading. Remind yourself that you will win some and you will lose some. The important thing is staying true to your strategy and not becoming upset by the ups and downs along the way.
Day Trading Tips #8: Accelerate through automation
Decision making is the most difficult part of trading.
Trading decisions include:
- When to buy?
- When to sell?
- Is it time to take a loss?
- Where to take profit?
- Should I tighten the stop?
- How many, how long?
Those are a list of starter questions. There are many more.
The better the trading plan is, the more questions it answers up front. That is one form of automation, but it isn’t the only one.
“Automate your trading decisions up front so you don’t have to decide in the moment.”
Another powerful form of automation is to set a stop and a profit target at the same time as your trade entry. Many trading platforms can help you automate this. Once you have this automation in place it leaves you with one decision to make – where to enter.
No matter how you do it, reducing the number of decisions you have to make while trading will help. Automation, writing down rules, and many other tactics work. Pick the methods that works for you and cut down on the number of decisions you have to make during trading action.
Day Trading Tips #9: Forget fear and start now
Many unfortunate traders fall into the trap of analysis paralysis. This is a condition where someone gets stuck in analysis and is unable to take action. These traders do not want to trade until everything is perfect.
How can you cure this destructive situation? The best answer I’ve found is: active practice.
Active practice is a very beneficial asset to all traders. It helps avoid the urge to wait for the perfect opportunity which can stunt a traders’ growth. Practice trains you to act when things are good enough, not until they are “perfect”.
If you are feeling analysis paralysis get onto a simulated trading platform. Start to practice ideas and place trades. Track what happens and how you feel. You will learn about yourself as a trader and the trading process by taking this simple step.
Simulated practice can break the negative chain of analysis paralysis. Don’t fall into this common trader trap. Break free with active practice in a safe environment. You have nothing to loose and everything to gain.
Forget the fear. Start simulated, and start NOW.
Day Trading Tips #10: Practice patience to product profits
An unfortunate trading truth is that overnight disaster is more common than success.
Most overnight disasters are the result of chasing the overnight success. Trading in real life doesn’t happen the way it did in the movie Trading Places. In real life, it’s a fool’s game to chase one big win that would set you up for a lifetime.
“Money is made by sitting, not trading.” ~ Jesse Livermore
Lawyers, doctors, athletes, architects, engineers and other professionals train a skillset. Their skills serve them throughout their careers. Traders are no different. Be patient. Trading is a skill that will serve you a lifetime.
Avoid trying to become the overnight pro. Practice patience. Apply what you learn and steady march toward massive trading success, one small step at a time.
For more day trading techniques, tools & strategies, check out these articles:
- 7 Unwritten Day Trading Rules To Follow
- 8 Common Mistakes To Avoid When Day Trading Forex
- 11 Things I Wish I Knew Before I Started Day Trading Stocks
Follow these day trading tips and you will be on the right path in the markets.
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