Archives: 2008 May

Not everyone can get into the business of day trading for the simple reason that a person’s personality is a crucial factor in successful trading. Personality separates the good risk takers from the too meek and chickenhearted and it defines who have good trading instincts from those who do not.

One’s style in controlling his emotions serves as a prediction of how long that day trader can stay in the business, as an approximation of his probable profits and losses, and the types of trades that the trader will make. Apparently, the right mixture of emotions is necessary to define a good trader. Patience is one of the most useful emotions in advancing a trading career.

Being able to wait, to restrain yourself from rushing to make up losing trades, to discriminate between the best stocks to buy and or to sell, and to place close stops on time, are some of the most important qualities that a good trader possesses. It may be an old adage but patience is really a necessary virtue in order to be a good trader.

Sorry to be the bearer of bad news but there is no foolproof way to profit in day trading. The majority of traders who start day trading begin with only fundamental knowledge which provides general guidelines for their initial decisions. As they learn the techniques of day trading, they begin to develop their own systems that work based on different day trading styles.

There are several kinds of styles involved in day trading. Some of them are as follows:

Swing Trading – Developed during the 1900’s, swing trading is a style that adheres to forecasting the succeeding behaviors of the market based on the swing it followed during previous trades. While day trading is described as a trade that is normally held with a maximum of one day, a swing trade could make up anywhere from a day to several weeks. Swing trading works on the principle that changes the behavior in the market will only yield significant profits if held over a certain period of time.

One of the advantages that swing trading has is that it can give good chances for traders to take advantage of the predictable movements of the market and the expected range of highs and lows based upon recent prive action.

There is no such thing as beginner’s luck in day trading. While a few traders may have some lucky trading days, relying solely on being lucky in the long run will not make you successful. Here is a guide to a few common day trading mistakes that beginners (and sometimes experts) commit, and must be avoided if you expect to make money from day trading.

The first mistake that traders should not commit is to use all of their money for day trading. This is something that no trader can do if they expect to be successful. In trading, use money that you can afford to lose, not your lifetime savings or a student loan. Experts will tell you that “scared money” will never gain, probably because of your own fears and anxieties as you go try to trade using money you can not afford to lose. The pressure becomes too great for the scared trader to make good decisions.

So before you get hooked or even start day trading, make sure to set aside funds for payments that you need to make like rent, mortgage, and other loan payments. That way, in case you fail, you will not lose all your money and have to suffer and perhaps damage your credit rating as you try to cope with your losses.

Here are four mistakes that day traders all too often find themselves making when starting out with day trading. The mistakes are easy to make without day trading experience so be sure to learn from each experience as much and as quickly as you can.

Bad timing:

The majority of day traders acknowledge the need for certainty. They always want to be sure that they are entering a winning trade. Theoretically, everyone can profit from any trade. The difference lies on “when” they decide to enter. Some people wait too long, some impulsively get in too early. There must be good timing based upon the use of technical indicators to help you spot the trade that will earn you a profit.

In most cases, day traders let trades take off without them. They tend to wait until they become very certain of what to do. Many wait too long then hop in just before the trade sells off. Just like the game of musical chairs, someone will always be left without a chair to sit in.

Being too hopeful:

Day trading has become popular in trading the stock market because it has proven itself to be lucrative and appealing to disciplined stock traders who want to engage in day trading as another type of business. Here are some of the benefits of day trading:

Income:

There is money in successful day trading. This is the very reason why people quit their jobs and focus their resources on this business. However, no one can make money all the time. There are winning streaks and losing streaks in this business and sometimes losing is inevitable. However, we can’t discount the fact that there are big time gains to be realized when all the necessary attributes of day trading are met.

Daily income from day trading could go anywhere from $100 to $1000. But those who are more skillful and have a lot more experiences in this business are more likely to have higher incomes than novices.

It must be noted though that there are several expenses that a trader should attend to like commissions and payments for special trading software. Then over trading can eat into the traders profits and turn winning days into losers.