Day trading: Not for the faint of heart!
Day trading refers to opening and closing a position within the same trading day. Day traders rapidly buy and sell stocks throughout the day in the hope that the stocks will continue climbing or falling in value for the seconds to minutes they own the stock, allowing them to lock in quick profits.
Here are the characteristics of a successful day trader:
- They stay neutral
- They have a strategy
- They keep a journal on all trades
- They focus on 1 to 3 techniques that suit them well
- They are great money managers
- They are comfortable with risk and uncertainty
- They accept personal responsibility for all of their action and
- They use risk capital to trade
If you can't conform to those requirements then you have no business being a day trader.
The concept of keeping a journal is so important that I want to discuss it a bit more with you. You can not possibly keep the details of every trade in your head. Your trading history is important because you need to study your trades to see if there are any pattern of success or failure that emerge.
When making an entry into your journal, track the following details:
- The ticker (of course).
- The time you got in.
- The time you got out.
- The in and out price.
- Why you took the trade.
- A short summary of what was going on in the market at that moment.
- How the stock behaved
This may seem like a lot of work, but once you get used to doing it, it gets easier. Review your journal regularly and you will show you your weaknesses and strengths.
Being comfortable with risk is another topic that bears closer examination. Risk is the name of the game in day trading. You can't be a day trader if you are playing with "scared money". That's because you will let fear and greed control your decision making process. Great traders learn how to deal with risk early in the game.
You can't day trade if you don't have access to real-time market data. Relying on delayed quotes will cause to to execute many losing trades.
Here are the minimum items that need to be in your toolbox:
- Real-time Stock quotes and ticker
- Real-time market averages and indices
- Real-time market news stories
- Real-time Charting
- Real-time Price and news alerts
Plus, if you can deal with the background noise, keep your TV tuned to one of the 24 hour news/business channels so you can hear breaking stories and stock market news as they occur.
Online Order Execution
A day trader also needs access to the market to execute trades. There are two basic types of online order execution services. The first type of service is that which is commonly offered by Internet-based online discount brokers such as E*trade or Quick & Reilly. The second type of service is a specialized service that connects the trader directly to the relevant exchanges via modem or dedicated phone line. These systems are called Electronic Direct Access Trading (EDAT).
Serious traders need to consider an EDAT system if they want to be in control of their own trades.
There is a lot to know about being a day trader. This article is only the tip of the tip of the ice burg. You can make or lose a fortune in moments. Make sure that you know what you are doing before you enter this exciting and rewarding career!
Reproduced from www.stock-trading-advice.com