Most newcomers have preconceived ideas about the typical day in the life of a day trader. While you may envision a glam but gritty environment steeped in living-on-the-edge excitement, veteran traders know that the reality can be very different. Here are 8 things you’d never learn on your own…or that might take you an awfully long time to figure out.
1. Trader, Know Thyself
While day trading may seem formulaic, it can actually be the opposite of cut and dry; in fact, the different styles of day trading are heavily dependent on the personality of the trader. From scalping to intraday trading and everything in between, there are many options for trading styles, and nothing binds a trader to a single one. Bulls of Wall Street offers comprehensive training for everyone from total beginners to those who have mastered skills and are ready to make trades.
2. But Also Know When to Quit
Prematurely abandoning your trading style at the first indication of poor performance is a huge mistake; one of the most critical tasks of a day trader is to commit to a single style and stick to it. When you find a style that works for you, it’s important to give it time to do its thing. The sooner you commit to a strategy, the sooner you can set aside ambiguity and focus on the end game: making money.
However, there’s a little known flip side to this equation. The best day traders also recognize when a style or type of trade isn’t working and make the necessary adjustments. You need to learn to recognize when to stay the course and when to jump ship.
3. Think Outside the Stocks
While even the most novice traders have some basic understanding of stock markets, the vast majority of newbies are unaware of the multitude of other markets accessible to day traders—from currencies to options to futures. It’s critical to keep in mind that not all of these markets are created equally. Choosing the right market is as important as making the right trades.
4. To Market, To Market
So how do you choose? Several considerations influence which markets offer the most profitability. These include concrete aspects, such as your initial trading deposit and your location, as well as more variable factors, including the trader’s personality and location. Futures markets are a good starting point for novice day traders as there are many types to choose between. Keep in mind that some markets will not be available depending on the tick value and initial margin.
5. Location, Location, Location
While night owls may have more options, day traders are inherently limited by location because of varying market trading times. On the flip side, accessibility is at a premium when it comes to online trading. Ultimately, traders require little more than Internet access and a computer to begin turning a profit. From a beachfront penthouse in Costa Rica to a balcony overlooking Bourbon Street, trading can and does happen anytime and anywhere.
6. Bring On Da Noise
Day trading is a science and art. One of the greatest challenges faced by day traders of all levels is “noise.” The phenomenon of non-stop back-and-forth information exchange can lead to “whipsaw” losses for traders who are unable to distinguish between meaningful and meaningless information. You’re best bet is to develop a strategic trading system—along with the discipline to see it through—to prevent noise-induced overtrading and instead capitalize on real opportunities.
7. The Calm Before, During, and After the Storm
While your Hollywood-influenced vision of traders may involve a trading pit, brightly hued jackets, and frenetic gesturing, the reality is completely different. Because trading involves many monotonous hours in front of the computer, patience is essential. Those who respond to boredom by “making up a trade,” are setting themselves up for disaster. Unchecked emotions—including boredom and panic—can lead to losing trades. The truth is that some traders don’t make a single trade on any given day; this can be preferable to making a rash or desperate move just to do something.
8. Fake It ‘Til You Make It
Many novice traders get their feet wet by trading in simulation—also called paper trading—to practice dealing with the unpredictable emotional responses. Simulated trading offers the identical experience to trading live, except orders are simulated by trading software instead of sent to the exchange. Simulation lets you experiment with markets and trading systems until you find your own trading system. It’s also a useful way to familiarize yourself with your trading software. Bulls on Wall Street’s Trading Bootcamp offers critical live simulation so that when your own real money enters the equation, your emotional response will be mitigated by experience gained in simulation.
It’s possible to earn a full-time living through day trading, but the learning curve can be steep. These insiders’ tips and techniques can help you bypass the typical beginner’s challenges and begin your life as a profitable day trader today.