When it comes to your day trading habits, the best advice is generally to follow two or three techniques that you’ve seen to historically work well. This is definitely a trait of the great day traders, who focus on between one and three techniques. The advantage of this is focus. If you’re watching several different stocks and using several different techniques, you’re thinking about too much. Mistakes are almost a foregone conclusion.
Another way of putting it: a jack of all trades, master of none is typically a low paid unskilled worker. Experts are always better paid and if you focus on just a few day trading techniques for stock trading, you’ll become an expert on the technique you are using. Use it again and again; it will keep working, so will you.
If you manage to become an expert in only one to three trading techniques, you’ve also have enough energy left to become an expert in money management as well. Great poker players are great money managers and risk managers. Great traders are also great money managers and risk managers.
Traders and poker players respect the risks they take. The best poker players are tight aggressive players. They play sensibly, betting small amounts and backing down when they don’t have good hands. The difference is: when they play with a good hand, they’re aggressive. They are ruthless about following through. Great traders need to behave the same way.
Great traders protect their accounts. They trade usually with as little as ¼% to 1% per position; no more than 2%. Before you blow out your seed money chasing down hopeless stock, you need to realize: if you lose all your money today, there’s no way you’re going to make any money back tomorrow. Discipline in money management is what’s going to get you through the dry patches, the small and careless mistakes. It will also help you to manage your emotions to prevent a whole host of problems from plaguing you.
Not all traders have large accounts to work with. Many have very small accounts, but if you apply the ¼% to 2% rule, you’ll be betting amounts so small you’re hardly going to blink an eye about losing a little here and there.
The final tip to becoming a great trader: only trade with money that you can afford to lose. We’ve said this once and we’ll say it again. If you do your reading on day trading, you’ll definitely hear this again.
Great traders use what’s called risk capital. They definitely do not trade anything close to all the money they have in the world because, if you do this and lose, there’s no way you’re going to make up what you’ve lost. Trade with money you can’t afford to lose and you will compound many of your potential problems. You will make a whole range of unnecessary mistakes and, before you know it, your assets will be at risk.
If you are disciplined and sensible enough to trade with risk capital, you can rest easy at night. You can have a bad day and maintain your poker face. You can remain unattached to each of your trades and you will be able to follow your trading strategies and plans without blinking an eye.
Most successful people become successful by following the example of others. Reading and learning are part and parcel of any job, any profession; particularly when you want to become successful. Follow the guidelines above to become a better day trader, but be sure to make use of the internet and your local library and bookstore to explore other perspectives and more advice.
