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Day Trading Secrets: 10 Strategies For Successful Trade

Mastering day trading is mainly experience and a lot of knowledge, but not only. Whether it's planning, emotions control or managing risks - here are 10 tips for successful trade.

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By definition, day trading means you buy and sell financial instruments within the same day or even several times over an entire day. Using the little price movements to your advantage can reap you good dividends but only if you play it correctly.

But it’s dangerous ground for newbies or an investor who doesn’t have a well-defined game plan. The other crucial thing is, not all brokers are capable of servicing the high volume of trades that day traders make.

Here are some great habits for successful day traders:

1. Understand What Is Your Niche

You might be telling yourself that you’re ready for day trading and you may have already identified a market to penetrate.

Your first job is to find a recurring pattern (or one that repeats often enough to make a profit) and of course, take full advantage of it.

You can identify the stocks (shares of well-known companies) that you want such as Amazon (AMZN) and Caterpillar (CAT). Or perhaps you’d rather move to the forex market and trade currencies such as the Euro against the US Dollar (EUR/USD). There’s also the wide choices of futures available to trade (futures often rely on commodities or indexes for the prices). In the futures market, you could pick oil, gold or S&P 500 movements to make a profit.

There is not one ultimate best market in all of these. The real choice depends on what you want to trade and what you can afford. The forex would have the lowest capital requirement to day trade. All it takes is a few hundred dollars to start although we’d recommend at least $500 to make your initial venture worthwhile.

Each market has excellent profit potential. The question is how much capital you need to go into it. Pick a market you want first so you can start learning about it and not waste your time researching other markets which may end up last on your list of choices.

Have the discipline to resist trying to learn and master all of them at once. This will definitely sidetrack your efforts and move back your timeline before you can actually start making money. Once you’re having success in one market, it is easier to shift to other markets to learn and adapt. You just have to be patient. There’s no urgency to learn all markets immediately. You can learn other markets at a future time (if you still want to).

2. Responsibility Is A Key

Every successful trader knows that for every move, action, and a decision he makes himself accountable for it. You’ll never find a successful trader who will blame another person or events for his or her trading losses.

This is of critical importance in becoming a successful trader because unless you take complete responsibility for all your trades, you will never completely rebound from small failures and you will deprive yourself of your rewards.

Moreover, when a trade or deal goes south, the traders who take responsibility for their actions will try to learn from the mistakes to see how they can improve and not stagger in the failure.

The responsible trader will look at the events and find out what went wrong and what he can do to avoid a similar incident in the future. The trader who does not assume responsibility will often say “The market wasn’t right” or “My broker is a bonehead.”

This kind of trader will probably make the same error again but he will never understand why he cannot succeed in his trading activities. So, now you see how important this step is.

Above all, you must take responsibility for everything that you do. If you don’t follow this step, you may succeed but purely out of luck – and nobody’s perpetually lucky.

3. Control Your Emotions

You can find books that will try to make you understand that your emotions can become your worst enemy in your investment adventure. People tend to attach themselves with stocks that have some sort of ‘emotional ties’ with them (stocks from relatives or stocks with personal significance).

Some investors purchase stocks that their fathers used to buy in the past without doing an adequate analysis and incurred big losses because of it.Always go with what your research and analysis tell you. Learn to trade in a way that your emotions have no say in the decision-making process.

4. Plan A Trade And Trade A Plan

What this rule means is that you should formulate a system that is most appropriate for you and stick to this system regardless of the situation.

This plan should help you get through to every situation or development. Remember that once you’ve let go of your money, you also let go of control – there’s nothing you can do anymore. You can’t even predict how the prices will react and the only thing you can do at the moment is to stick to your plan.

  • What is your entry strategy?
  • What is your exit strategy?
  • What will you do if there is a merger?
  • What is your plan if the price nears your stop order?

Make sure that your system covers everything you can think of. Then, you simply follow your game plan and there’s no need to stress yourself or do a lot of thinking when situations happen.

5. Trade/Life Balance

It doesn’t matter whether you’re a veteran trader or a neophyte but trading will always be stressful. The act of trying to make money is a stressor. As an active trader or investor, you should do everything to eliminate this stress. With less stress in your life, you’ll be happier and be more successful.

The happiest traders aren’t necessarily the ones who make the most money but the ones who do not have a lot of stress.

They have their priorities right and can combine family life, friends, hobbies, sports and leisure activities in the right proportion. This allows them to follow their system without struggling with every move. That is quite a feat!

It’s not good to let your trading career – whether actually doing trading or just thinking about it – consume your waking hours. You can stress yourself when your results are bad and you’ll also pressure yourself to do even better when your results are good.

6. Taxes And Trading Costs Can Eat Into Your Profits

Making profits can be good but don’t expect that every cent will go to your pockets. In fact, prepare yourself to see how much of it goes to taxes and stockbroker’s commission.

These and similar costs are factors you should mull over before you start trading. See if there’s anything you can reasonably do to bring them down.

One technique is to find a broker who charges a flat brokerage fee rather than working on commission. You can consult your broker, accountant or a tax professional for other methods to lower legitimately taxes so you can maximize your profits in your share trading.

7. Not Focused On The Money

Money is certainly important so you should pay attention to it especially when it comes to managing your risk. But to make it the primary focus can make you do some illogical things.

When you pre-occupy yourself with money, it can cause you to move your stops further from the price, agree to small profits out of fear of losing your holdings and instinctively jump in to avoid missing the move. These practices will not help you stay long in the business.

The price exists with its own incomprehensible behavior so it will do what it’s going to do no matter what you do. No trader can say that he can directly influence or direct the outcome of any trade but there is something that you can easily do.

We assume that you already have a method to trade and have also a plan to follow. You’ve tested the plan and you’ve noticed that your successes are bigger than your losses (or perhaps it’s the other way around).

The only thing you can do and focus on is this: execute the trading rules that you have tested and let the results come naturally.

That’s all you can really do. And should do.

When the conditions line up for a good opportunity according to your trading plan, just grab it without hesitation. You execute the trade, manage it and accept the results as they become contributions to your wins and losses.

Not allowing the profit/loss column to consume you while you are trading can do incredible things to your consistency.

8. Manage Your Risks 

Many traders think that you should make a grand entrance, so to speak, when you first start to trade because a good set up could be the beginning of your money-making deals. That has some logic to it since you won’t make anything if you don’t break into the market somehow.

You think you’re all set: you’ve picked a market, your software and gears are ready, and you believe that you have sufficient knowledge about day trading. But before you even start looking for the first stock to buy, you should already have something in place to control your risk. Day traders pay extra attention to two things – trade risk and daily risk.

Do not take risk control for granted and make sure that each time you trade, you can handle multiple losses in a row.

Suppose that price is nearing the pre-defined stop level that you set up according to your game plan, just absorb the loss and move forward. If you wallow in the loss and let that losing stock run some more, it’s going to add more pain and sorrow to you. If you wait until that moment when the circumstances will force you to exit, you may have already lost your opportunity to recover your capital.

Traders usually place their stops very near to the turning point or range break because that way, they can optimize their position size. The problem with that is you include yourself in the cluster of stops and its very visible to the big players.

When you put your stop outside of the usual zone, you may decrease your position size or lessen the impact of your trade (because your account size is too small). The upside is that when the big fishes hit the bunch, you will not be part of it.

9. Be Cautious With Selling Short

Short selling is a quick way to make money when stock prices are on the decline. It’s not illegal or unethical but it’s risky.

To do it, you borrow shares (whose prices are falling) from a broker, sell them and when the price drops further, buy them back for a profit. It will initially put you in a negative position but that’s part of the system. If you shorted 1,000 shares, your account will have minus 1,000 (negative). If all goes according to plan, the stocks drop and you simply buy the shares back and earn from the difference.

Another way to put it is this: you’re still trading (buying and selling) but you’re doing a mirror-effect on how traders usually do it.

10. Be Realistic And Stick To Your Plan

You probably won’t find a seasoned trader who can say that he’s won 100% of all his trades. The truth is, most traders would only register a batting average of 60% of their trades at maximum even while they stick to a very good trading strategy. The overall goal is to get a ratio that favors the winning side over the losing side. When your wins make more money for you, you can absorb the losses without hurting your finances too much.

You have to set a pre-established percentage of your account as the limit of the risk that you will take. Write down your entry and exit points and make sure they are very clear to you so that in case you need to execute them, you can do so regardless of how excitedly the market is behaving.

One thing you need to learn is to be comfortable in the fast-paced trading environment. When you stick to your trading strategy, you can navigate the rapid market movement without much trouble. Discipline is of utmost importance – it will help you follow your game plan and increase your chances of success rather than chasing empty fantasies of great profits.