There are two key principles you must master to become a good day trader. You must become disciplined and you must learn to focus intently. A scary truth about day trading is that about 80% of people who engage in this type of trading would be better of taking their money to a casino and playing at the slot machines. Making money as a day trader really depends upon a keen awareness of the right information and excellent discipline.
Discipline: Think Like A Trader
Poker players have to be disciplined. Day traders should follow in their footsteps. Good discipline is about maintaining habits; good habits that can help you, most particularly, when things are not going the way you want.
As in a poker game, what makes the real difference, what separates the good players from the great players, is how well you respond to the losses.
Trading, you need to be consistent. You have to make a lot of decisions as a day trader and you probably won’t have that much time to make them. If you are disciplined, you will manage to act consistently, and in accordance with the pre-determined trading strategy or system set forth in your trading plan, even when, and most particularly when, things don’t seem to be going as you had planned, hoped, or expected.
To be a good day trader, you should establish a trading plan and system that will govern your practices. Systems generally impose parameters and set out criteria. Habitually following such a plan or system is the exercise of good trading discipline. Reviewing your plan when you have found that it has not worked well is also a disciplined act.
Never allow your emotions to rule your day trading. Countless inexperienced traders respond to their emotions about a particular stock. Many become afraid and reluctant to take losses. They act on their fears; they respond by refusing to sell the stock, hoping, often in vain, that it will rise again. Unfortunately, it’s only by accepting losses and responding to them in an unemotional way that you can hope to minimize them and thus become a successful trader, able to capitalize on your wins.
Also, you should never let greed influence your decision making either. Even the best day traders make this mistake. As the prices rise, they grow reluctant to sell. You can see the wheels turning: their trading plan and system go flying out of the window as they watch the ticks, thinking all the while of the profits increasing and increasing. The stock price will rise and they will make even more of a profit for the day. However, and it happens more often than not, the share price subsequently drops, causing their gains to dwindle. If you don’t act fast enough, if you’ve become sufficiently distracted, you’re gains can easily become losses. Fear and greed have no role to play in the life of a disciplined day trader.
