AT THE CLOSE
Daytrading’s not a profession for the weak, that’s for sure. Try these tips to help you trade.
It’s a classic catch-22 in a recessionary job market: People looking to enter a new profession find they cannot get in without at least some relevant experience, yet they have little chance of gaining any experience because employers are eliminating or outsourcing entry-level positions. One notable exception to this is daytrading, which is the practice of buying and selling a stock within the same day. Anyone with a few thousand dollars in seed money can set up a short-term trading account and compete for profits alongside huge investment firms and seasoned, multimillionaire traders. The only credential you need is a positive account balance to make tomorrow’s first trade.
Remember that consistently successful traders do not have to win all the time, just over time.Daytrading is also inherently adversarial: The strong make a profit by taking money from the weak. Inexperienced traders can (and do) lose thousands of dollars in a matter of minutes as the stock market soars and dives. For every beginning daytrader who goes on to achieve long-term profitability, about nine others fail.
Although there are no shortcuts or sure-fire formulas for successful daytrading, some of the most common pitfalls can be avoided by following six basic tips designed to help traders develop more consistent and professional practices.
1. Prepare your mind
What you believe about yourself is the most powerful predictor of what you can achieve in daytrading. A world-class athlete does not wait until he wins that first Olympic medal to start thinking and training like a champion. Likewise, great traders start to envision themselves as being successful before they ever make their first profitable trade of the day.
When he or she loses money, a successful trader can mentally contradict that fact by picturing him- or herself achieving the next good trade. Great traders don’t allow the situation — their last losing trade — to create or reinforce a negative belief. Instead of saying, “I always get stopped out on my trades,” try rephrasing that statement in past tense: “I had a problem with setting my stops today, but I’ll do better tomorrow.”
Another technique for developing a success mindset is to think about breaking your own “Olympic record” with every trade. If your highest profit on any one trade has been 10 points, resolve to keep trading until you earn 12 points. Picture yourself reaching that goal.
More than any technical trading setup, a success-driven mindset helps traders stave off the fear that can leave them stuck in a bad trade or afraid to hold onto a good one.