Once upon a time, we imagined people who traded in the stock market daily were the ones working for some huge companies, wearing tuxes and drinking tons of coffee. Admit that you can picture those folks yelling at someone on the other side of the phone line due to some unexpected event that was threatening to endanger their already enormous fortune. We usually didn’t have in mind someone’s beginnings or their first steps in the day trading world. Or how they maybe had some routine or ups and downs before they managed to buy fancy stuff and lead such high-society lives.
These days, with the holy rise of the internet and online world advancing to its unknown destinations, we kind of stop imagining traders that way (well, at least that way only). We easily adjust ourselves to the images of people clicking in front of the screens as individuals, without any institutions involved as mediators.
People who do business in this field follow strategies to earn a profit off of fluctuations in prices for a particular property. This includes buying and selling securities daily – usually in the stock markets and forex. The profit is being earned through applying trading strategies and tactics to obtain money through daily price changes. This means a high level of adaptability and short periods of status quo in any given way.
1. Risk vs. uncertainty
We’ve heard countless stories about those who like to risk and those who don’t. Much less have we heard of those who like facing uncertainty. The difference is huge, yet it can be easily neglected at the first glance. In risk, the result can be predicted, while it doesn’t have the 100% certainty to happen. On the other hand, uncertainty includes the impossibility of anticipating and quantifying the result.
In the day trading world, there’s a golden rule that traders shouldn’t risk more than 1% of their account value in a single trade, that is – don’t do anything that won’t ensure that you lose up to 1% per trade, which will protect your capital from being irretrievable.
2. Trading strategy
There are plenty of strategies for day trading depending on whether you’re just beginning to trade or you are already an experienced trader. Every single one of them needs to implement some steps such as trading news, swing trading, arbitrage, Ichimoku Kinko Hyo, RSI, and Stochastic Oscillator, or Post-Gap Trading with Price Action, etc. Each one of them brings its benefits and flaws and can turn out to be a winning one at one time or a losing one at some other moment.
Merging it all, some rules are beyond the first lines of obvious, and you learn them after some time. This should be implemented in whatever strategy you decide to go with.
- The plan is a must – never use random choices that don’t include a perfectly planned algorithm of steps you are taking when trading. Draw yourself a line when to exit and when to enter and respect this no matter what. This way, you can avoid confidence loss and capital loss as well.
- Timing – never try to enter late, cause you’ll end up running after a bus that you can’t climb and the next empty one will be lost the same way as the first full one.
- Capital protection – if you fail to protect your capital, every try is condemned to failure. This is because you miss to understand and accept that not all trades that have good perspectives at the moment are going to remain like that while the market is open. The way you learn when to close your position will determine the effectiveness of your selected strategy.
3. Psychological aspect
You already know that not everything is for everyone. This by any chance doesn’t mean we would like to drive you off of the day trading market cause you don’t belong to a certain group of people who are born to do this. It means that you need to be aware of what characteristics are important to develop quickly and what you already have as good odds for further business.
Impatient people learning patience? Hard to achieve, but not impossible. Impatience doesn’t get on well with adrenaline junkies, that day traders mostly are. And, well, Murphy’s law implies that learning to understand when to slow the ball here can bring you more than going through the wall with your bare head.
4. Learning how to fall
You might think or believe that based on your knowledge and experience the period of being profitable will last always or at least, 90 % of the time. The beginnings can be tough and even one loss can count up to more than you ever won in the first place, even though it’s only one loss for a longer period.
The speed of this market can swallow you and brutality sharpens your senses in a way you wouldn’t believe. Always know your risks and your position and make sure to play big only when your strategy of a high probability of profiting allows that. It’s better to know your place and ensure your risks are well calculated than to over-analyze.
5. Eggs in the basket(s) rule
Wanting one thing only and sticking to it without having a plan B is sublime and admirable, at the same time poetic, but in the market like this, it can cost you your job. When starting a day trading job, make sure to diversify – try multiple chances and don’t lean on only one as it might cost you more than you think.
This can be called a ‘strategy’, yet we believe it’s more than that – it should be introduced as a mindset of investment generally and this is also a fantastic way to minimize the risk and uncertainty. When you win some and you lose some, you’ll have profited from winning ones and cover losses from losing ones, that will make you wipe your tears and move on to the next adventure. And there’s probably nothing that could give us more valuable information on this than the article on this website – the only thing we need to do is to follow the tips.
Day trading can be a huge challenge, at the beginning and after some time as well. The knowledge you obtain along the way and in advance will help you a lot, cause everything you understand will frighten you less. This type of work is time-consuming and requires focus and emotion detachment from it, though.
Whatever you do, try to take it seriously. Research the tactics, stay adaptable and get used to introducing yourself to the world of patience, focus, dedication, wisdom, and preparation to know when to start – and when to stop and say ‘no’.