Is Day Trading For You? Getting started!

So, let’s say you’ve decided to become a day trader.First, notice that I said “become” a day trader, not “do” day trading! That to which I refer is that day trading, just any other form of trading or just like any other form of professional work, is an art that must be developed over much experience, work and time. In short, you’ve got to get immersed in it.

While, in some of the previous posts, I’ve cited some of the lures of day trading, now I’ll offer a five ‘hot tips’ on day trading:

Tip #1 – Cut your losses short. While most traders enter a trade with their eyes glossed over with the amount of PROFIT they might be able to make, don’t do as ‘most traders.’ Be primarily concerned with how much you can LOSE and have, as your goal, to become an expert on reducing and preventing those LOSSES. When you’ve become an expert at NOT LOSING, you’ll suddenly find that, in the process, you’ve also gotten proficient at making PROFITS!

Tip #2 – Be a trend follower. Traders tend to select different approaches. One tends to be a reversal trader, i.e., one that seeks the right timing of when an underlying has been going in one direction for a while, but is about ready to turn and go in the opposite direction. The goal of this trader is to see that ‘bottom’ or ‘top’ coming and jump in ahead of it to get great prices that will pay off after the reversal actually occurs.

The other trader is the trend follower, i.e., he sees a trend and jumps onboard to ride that train that has already begun moving in a direction, with the opinion that it will continue in that direction long enough for him to make a profit.

The former approach includes a time needed for the reversal to happen that day traders often don’t have. Therefore, just from the perspective that the day trader must be in and out of his trader before the bell rings, closing the day’s trading, if you’re a day trader, be a trend follower, because that trends is occurring RIGHT NOW.

Tip #3 – (This is a tough one.) Even though the pace is fast, even though you must make quick decisions, even though you’ll experience sudden, dramatic losses, you MUST CONTAIN YOUR EMOTIONS. This is easier said than done and will be the fodder for many more future posts.

Tip #4 – In the fast moving environment of day trading, you HAVE no time to think, evaluate, analyze or do a study. All of those must be done in ADVANCE of placing the trade. Therefore, it is prerogative that you have a set of very clear, precise, step-by-step rules and procedures on what to do in ANY eventuality in a trade. When you’re emotional, you must depend solely on these rules and following them ‘blindly’ when in the sand storm.

Tip #5 – Have the COURAGE to spring for the trade when your indicators, set in your written rules, appear. This can be challenging, especially after a string of losing trades, but it’s what the winners do!

Finally, in day trading, as in any other form of trading, always take full responsibility for your actions or inactions and remember that most of trading depends, not on knowledge or technical skill, but on self-confidence, self-discipline and good money management practices.