How I Made $47,692.27 In A Single Day
The Subtile Trap of Trading
Day Trade Extreme
The Psychology of Price Movement
Trading Stocks and Options as a Business
Inside Days Chart Pattern Course
Free Forex Trading Course
by Jens Clever
You probably know guys for whom the world sucks if they take a loss of $100 and if they make $1000 they are on top of the world. They are definitely not neutral.
If you are like that, then your day trading will almost certainly be driven by fear and greed; if you are down $100 you probably donít want to take a loss, just because you know that you will suffer emotionally. If you are up $1000 you might want more, even though you should just take profits. Or you might end up taking profits way too early because you are afraid that the position might turn against you. This is not good day trading.
The professional day traders donít let the day-today oscillations in their account faze them. The results of one week donít matter much, not even the monthly results. Itís just a small blip of time in their day trading career. The day-to-day oscillations actually donít matter much.
Emotional ups and downs are pretty normal for beginner day traders. If these emotions influence your day trading decisions too much, then I would strongly advise you to go back to paper trading in order to gain the confidence you need to not let those oscillations affect you too much.
Staying neutral in day trading also means to see the price movements like they really are, not how you want them to be.
You probably know the situation where a trade is going against you, and you start looking for other reasons why it is still a good trade and you should hold it. This is very dangerous for day traders, since it leads people to breaking their stops ó and losing big.
As a day trader, your entry and exit criteria has to be absolutely clear before you make a trade. Switching strategies while you are in a trade is one of the worst things you can do. You can always find a reason for your position to go up or down, but you donít see the actual price movement anymore. You are shifting from reaction to prediction! A day trader should under no circumstance try to predict future price movements.
As day traders we have to play the actual price movement, not what we think the movement should be! Please leave prediction to investors, you are day trading.
A lot of times I see day traders taking positions in stocks they know very well fundamentally. They mix day trading with investing. This is also very dangerous. While there might be reasons to enter a position for a short-term trade they often end up holding it as an investment if it goes against them.
Just think about Enron.
Yes, there were points during the Enron sell off where a trade would have been justified. Even I held Enron for a short recovery from about $8.5 to $10. The problem is, that if you base your entry on the belief that the company is cheap and it has to recover, you will be more and more inclined to hold your position or even add to it once it goes lower. The stronger your opinion on a stock, the harder it is to make decisions based on the actual price movement.
Day traders should not do this. I would strongly advise you to have a separate account for fundamentally based trades. A day trading account gives you too much leverage, making it very tempting to take risks that are way too high!!
I am not saying that it is not good to have expectations as a day trader; everyone should know what his potential trades are most likely going to do. Should those expectations be wrong, though, then a day trader has to accept that ó and react according to what is really happening. Click here to see the 7 Secrets To Successful Day Trading