By Steve John Cowan
Although it has been some years since I was actively involved in trading, I have just returned to the markets and have begun to trade a small account on my own behalf.
This has perhaps given me a slightly skewed perspective of the markets, almost like a new entrant, but one with a lot of experience.
There have been some big changes whilst I have been inactive, not least in the number of online brokerages fighting for every dollar.
But many things stay the same, at the heart of which is one, I guess, unbreakable truth. Trading is basically a very simple business, with any trading – stocks, options, FOREX, whatever – only really involving three steps:
1. Find several possible trades evaluate them and decide which to go for,
2. Calculate how much to trade, and decide at what points to enter and exit the market
3. Keeping an eye on, or monitoring, open market positions
Now, these three steps were basically all there was to it a few years ago, and they still And, guess what, people are still getting totally bogged down right here, at this early stage of the trading process, generally, for one of two reasons.
The first possible reason is that they simply are not aware that these are the steps involved in the trading process, or (the second reason) they have no clearly defined rules for actioning these steps.
Thus, less experienced, more nervous, traders can often take hours to evaluate a small number of potential trades.
Experienced day traders, on the other hand, are fully aware that, with little time available to execute their trading, they must have a process plan and they must stick to it.
A day trader will set out his (or her) plan of action something like this:
1. Recognize the opportunity, enter the market
2. Stay in the trade for as long as possible if it is going for him or
3. Get the heck out of there with minimum losses, as soon as it is clear it is going to go the wrong way
That’s it!
That’s essentially what a day trader in any market was doing years ago, and that is what a day trader is still doing today, with little or no change to their working practices brought about by the vastly more advanced technology of today.
Savvy day traders learn very quickly that they must plan ahead of time, so that they are in prime position to take full advantages of the opportunities that occur in real time.
Thus, day trading, which on paper at least is a pretty dangerous and risky manner of working markets is, in fact, one of the most disciplined trading schools!
By the nature of market movements and the way they operate, day traders simply cannot afford to run their trading business on a wing and a prayer!
Day trade with discipline and there is good money to be made. Trade without it, it’s a one way ticket to the loans queue!
Tuesday, August 25, 2009
Tuesday, August 11, 2009
How to Become a Successful Day Trader - 7 Quick Tips
By Peter Skotnicky
No matter which direction the stock market seems to be going, there are always stories people learning to become successful day traders. Even during difficult down-turns in the market these people are making serious incomes from successful stock trading.
So what do these successful traders know that the average trader doesn't know? How do they continue to keep their stock trading profitable, regardless of what the market is doing?
Here are some traits you might want to consider if you're interested in growing a successful trading business.
1. Understanding the Market
Successful trading comes from understanding that the individual shares listed on the stock market never move as one single unit. Each individual stock represents a portion of a much larger, publicly listed company. Just because you might see the average NASDAQ index is moving up or down, this doesn't automatically mean that every stock listed is going in the same direction.
While the average movement may appear to be going down, there will always be individual stocks that trend upwards. The same is true in reverse too. If you think the average market movement is going up, there will always be some stocks that drop in value.
This could mean that it's possible to select stocks that move in the opposite direction to the average movement in the market and continue to profit from stock trading even during downturns.
2. Risk Tolerance
Understanding and accepting your own personal levels of risk tolerance are vitally important factors if you wish to build a successful trading business. Learning about day trading from a person with a much higher level of risk tolerance means that you could potentially end up trading much more than you're comfortable with.
The same thing is true of listening to advice from well meaning friends and family who have much lower risk tolerance levels to your own. While they may see what you're doing with stock trading to be 'too risky' for their own preferences, you may be happy with the levels you have accepted.
Always base your stock trading strategies within your own risk tolerance levels.
3. Continuing Education
Choosing a hot stock pick based on the advice of someone else is never a great strategy for successful trading. Always take time to learn a little about the company behind the stock you intend to trade and base your stock trading decisions on the information you learn for yourself. The more you learn about how to analyze the trends of whichever stocks you're trading, the more likely it will be that you'll increase your day trading profitability.
4. Lose The Greed Mentality
Truly successful stock trading means not allowing greed to get in the way of your day trading strategy. If your chosen stocks have made their profit, sell up and realize the profits. You can always buy back into the market at a later point, but you can't always guarantee a profit unless you lock it away with a sell trade order.
Many newer day traders set themselves a strategy and plan to sell any stocks they have bought once it reaches a specific point. When the values reach the point they first considered being a good sell point, greed gets in the way and they talk themselves into waiting until the stock goes just a little higher, just a little further for just a little longer.
5. Be Prepared to Cut Losses
When the price of a particular stock begins to trend downwards, an experienced or more successful day trader will cut their losses and get out of the market before those losses compound any further. In fact, many of them would have set an automated stop loss order to sell out once the price begins to fall too far.
Newer traders seem to have a different mentality where they go into a form of panic mode and hang onto losing stocks, hoping like crazy that the price will recover and they'll make some of their money back. In order to be successful with stock trading, you'll need to be prepared to cut losses and continue trading.
6. Remove Emotion
A successful stock trading business is not an emotional venture. You need to learn to view your buying and selling as nothing more than a business transaction. Remain objective about the stocks you have chosen and stick firmly to your trading strategy. No matter what your heart or your gut instincts are screaming at you, run your trading business with your head. If your strategy says you should sell your stocks at a predetermined profit margin, then follow your strategy.
7. Day Trading Robot
Successful day trading can often depend on the trading platforms and stock analysis software you're using. While it's still possible to make good profits using only your stock broker's trading platform, as your trading business profits grow you should consider using automated software that can help you track and monitor the movements of many stocks at once. Some software can offer the ability to create pricing signals using charts of pricing movements, which are able to send you a buy signal and a sell signal based on trends for each individual stock you're trading.
No matter which direction the stock market seems to be going, there are always stories people learning to become successful day traders. Even during difficult down-turns in the market these people are making serious incomes from successful stock trading.
So what do these successful traders know that the average trader doesn't know? How do they continue to keep their stock trading profitable, regardless of what the market is doing?
Here are some traits you might want to consider if you're interested in growing a successful trading business.
1. Understanding the Market
Successful trading comes from understanding that the individual shares listed on the stock market never move as one single unit. Each individual stock represents a portion of a much larger, publicly listed company. Just because you might see the average NASDAQ index is moving up or down, this doesn't automatically mean that every stock listed is going in the same direction.
While the average movement may appear to be going down, there will always be individual stocks that trend upwards. The same is true in reverse too. If you think the average market movement is going up, there will always be some stocks that drop in value.
This could mean that it's possible to select stocks that move in the opposite direction to the average movement in the market and continue to profit from stock trading even during downturns.
2. Risk Tolerance
Understanding and accepting your own personal levels of risk tolerance are vitally important factors if you wish to build a successful trading business. Learning about day trading from a person with a much higher level of risk tolerance means that you could potentially end up trading much more than you're comfortable with.
The same thing is true of listening to advice from well meaning friends and family who have much lower risk tolerance levels to your own. While they may see what you're doing with stock trading to be 'too risky' for their own preferences, you may be happy with the levels you have accepted.
Always base your stock trading strategies within your own risk tolerance levels.
3. Continuing Education
Choosing a hot stock pick based on the advice of someone else is never a great strategy for successful trading. Always take time to learn a little about the company behind the stock you intend to trade and base your stock trading decisions on the information you learn for yourself. The more you learn about how to analyze the trends of whichever stocks you're trading, the more likely it will be that you'll increase your day trading profitability.
4. Lose The Greed Mentality
Truly successful stock trading means not allowing greed to get in the way of your day trading strategy. If your chosen stocks have made their profit, sell up and realize the profits. You can always buy back into the market at a later point, but you can't always guarantee a profit unless you lock it away with a sell trade order.
Many newer day traders set themselves a strategy and plan to sell any stocks they have bought once it reaches a specific point. When the values reach the point they first considered being a good sell point, greed gets in the way and they talk themselves into waiting until the stock goes just a little higher, just a little further for just a little longer.
5. Be Prepared to Cut Losses
When the price of a particular stock begins to trend downwards, an experienced or more successful day trader will cut their losses and get out of the market before those losses compound any further. In fact, many of them would have set an automated stop loss order to sell out once the price begins to fall too far.
Newer traders seem to have a different mentality where they go into a form of panic mode and hang onto losing stocks, hoping like crazy that the price will recover and they'll make some of their money back. In order to be successful with stock trading, you'll need to be prepared to cut losses and continue trading.
6. Remove Emotion
A successful stock trading business is not an emotional venture. You need to learn to view your buying and selling as nothing more than a business transaction. Remain objective about the stocks you have chosen and stick firmly to your trading strategy. No matter what your heart or your gut instincts are screaming at you, run your trading business with your head. If your strategy says you should sell your stocks at a predetermined profit margin, then follow your strategy.
7. Day Trading Robot
Successful day trading can often depend on the trading platforms and stock analysis software you're using. While it's still possible to make good profits using only your stock broker's trading platform, as your trading business profits grow you should consider using automated software that can help you track and monitor the movements of many stocks at once. Some software can offer the ability to create pricing signals using charts of pricing movements, which are able to send you a buy signal and a sell signal based on trends for each individual stock you're trading.
Monday, August 3, 2009
How Professional Day Traders Handle Their Trading Losses
By Edward Kingston
Day trading can be considered as one of the most rewarding careers on the planet. It is probably the only business out there that has literally no overheads and also unique because a trader unlike a regular worker can pick and choose his or her trading work hours.
Because trading can be started so easily as a business, it tends to attract people from all walks of life very easily. It also has a high failure rate because people that are drawn to it approach it without much thought. The biggest reason that leads to about 90% of traders failing is because of the inability of these people to deal with trading losses.
Trading, like all other businesses has to deal with losses that come naturally as a cost of doing business. This very ability to deal with trading losses brilliantly is what separates the 10% of successful traders from the rest who do not make it. So how do these professional traders handle their trading losses? Below are just some of the things that these successful traders do that keeps them going in this business for a very long time.
1) Patience and Discipline are of utmost importance. They follow their plan that they made for themselves very religiously. They know they do not need to take every setup and wait very patiently to take only those trades that meet their trading rules.
2) They are confident in their trading systems. They know that every system will go through a drawdown at some point. Their ability to navigate around those tough periods is what makes them winners.
3) Professional traders refrain from overtrading. They avoid it like the plague. Overtrading is the easiest way to run a trading account into the ground. They know that being in the market all the time increases the chance of being blown out too soon. They only trade one or two markets and do not overstay their welcome either.
4) Professional traders keep a detailed log of all their trading activity. They realize their trading losses as mistakes and work hard to not repeat them again. They also do not aim to make large sums of money in any one or two trades. They prefer to make small sums of money on each trade where possible. They know that even small consistent winners can add up to something big at the end of the trading quarter or year. After all trading is a journey, not a race.
5) Professional traders have the mindsets of athletes. They are always working on their game and never give up. They are always looking for ways to improve their performance. They know they need to work very hard at trading to achieve some great results. They also know when not to trade and take a break from trading when it gets too overwhelming for them.
Good luck with your trading journey.
Day trading can be considered as one of the most rewarding careers on the planet. It is probably the only business out there that has literally no overheads and also unique because a trader unlike a regular worker can pick and choose his or her trading work hours.
Because trading can be started so easily as a business, it tends to attract people from all walks of life very easily. It also has a high failure rate because people that are drawn to it approach it without much thought. The biggest reason that leads to about 90% of traders failing is because of the inability of these people to deal with trading losses.
Trading, like all other businesses has to deal with losses that come naturally as a cost of doing business. This very ability to deal with trading losses brilliantly is what separates the 10% of successful traders from the rest who do not make it. So how do these professional traders handle their trading losses? Below are just some of the things that these successful traders do that keeps them going in this business for a very long time.
1) Patience and Discipline are of utmost importance. They follow their plan that they made for themselves very religiously. They know they do not need to take every setup and wait very patiently to take only those trades that meet their trading rules.
2) They are confident in their trading systems. They know that every system will go through a drawdown at some point. Their ability to navigate around those tough periods is what makes them winners.
3) Professional traders refrain from overtrading. They avoid it like the plague. Overtrading is the easiest way to run a trading account into the ground. They know that being in the market all the time increases the chance of being blown out too soon. They only trade one or two markets and do not overstay their welcome either.
4) Professional traders keep a detailed log of all their trading activity. They realize their trading losses as mistakes and work hard to not repeat them again. They also do not aim to make large sums of money in any one or two trades. They prefer to make small sums of money on each trade where possible. They know that even small consistent winners can add up to something big at the end of the trading quarter or year. After all trading is a journey, not a race.
5) Professional traders have the mindsets of athletes. They are always working on their game and never give up. They are always looking for ways to improve their performance. They know they need to work very hard at trading to achieve some great results. They also know when not to trade and take a break from trading when it gets too overwhelming for them.
Good luck with your trading journey.
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