Day Trading Hints and Suggestions

Day trading can be very financially rewarding as well as intrinsically rewarding if done properly. You must realize right from the start that it is not easy and that you must proceed SLOWLY, deliberately, and with caution. In order to succeed as a day trader you must:

1. Educate yourself

2. Have a strategy

3. Trade using the proper money management

4. Have the proper mindset

5. Minimize mistakes

Educate Yourself

To succeed as a trader you must put in the time and effort to educate yourself on all the aspects of trading and the markets. The shorter term your time frame the more educated you need to be. Why, you may ask is this the case? It is because time is compressed and you are going to experience all types of market environments on a fairly regular basis. In order to be successful you are going to need to know how to trade:

• Long

• Short

• Volatile markets

• Nonvolatile markets

• Trending markets

• Non-trending markets

• Bull markets

• Bear markets

• Event driven markets

• News driven markets

• Unexpected events

That’s a lot to learn! By compressing your time frame you have less room for error and thus have to make up for it by further educating yourself. This is also why it is so important to have a trading plan.

Have a Strategy

To make money as a day trader you need a trading plan. A trading plan encompasses:

• What markets you intend to trade

• What strategies you intend to employ

• What hardware of software you need to execute your strategies

• Discipline

• Post Trade Analysis

Trade Using the Proper Money Management

Once you identify your trading strategy you need to make sure you size your positions properly. Not taking the time to work on position sizing and money management almost assures failure. To ensure success you must:

• Always trade with stop loss orders

• Determine your stops based on volatility

• Risk less than 1% of your equity on any one trade, newer traders should risk no more than 0.1 to 0.3% per trade

• Have daily and monthly drawdown limits

• Always trade with stop loss orders

Have the Proper Mindset

Successful trading is 90% mental and 10% execution after you have the basics down. It turns into a game of can you manage your emotions, mental noise, imagination, and follow your system. The proper mindset contains:

• The willingness to learn

• The willingness to admit when you are wrong

• The understanding that you must exit all trades at the end of the day

• The discipline to only trade with a strategy

• The discipline to follow that strategy

• The ability to know when to press, when to pullback, and when to take a break

Minimize Mistakes

Mistakes can and do happen and many of them can be avoided with some attention to detail and careful upfront planning. If a mistake does happen CORRECT IT IMMEDIATELY and then figure out what went wrong. Most people freeze or make a bad situation worse when errors happen. Trust me, shot first and ask questions later, get out. It will save you a fortune!

In order to minimize mistakes you have begin by making sure that you have all the correct hardware and software necessary to implement your trading plan. Next, you need to make sure that they are all operating correctly. You also want to make sure you that you have the proper connectivity speed. My suggestion is to go with fastest speed available. It does not cost much extra money and it will cost you more in slippage due to latency if you don’t upgrade to the max.

Next, be on guard for all the human errors such as:

• Buying instead of selling

• Entering the wrong order type, i.e. a limit order instead of a market order

• Incorrect position sizing

• Entering an order for the wrong market

• Entering the incorrect stop price

The only way to avoid these mistakes is to be alert, conscious, and double and triple check everything on a consistent basis.

Following all of these steps is essential to achieve success in this endeavor. Day trading can be very humbling if you don’t.

Lastly, you are also going to want to keep track of whether you are following your trading plan in a daily trading journal. Every day write down what worked, what didn’t, and whether you stuck to your plan or not. This journal will then help you identify what mistakes you are making so that you don’t keep repeating them. It will also help you identify what’s working so that you can do more of that.