Learning how to successfully trade the markets requires discipline and insight. Here are some tips / thoughts that I feel are important for any daytrader, whether a novice or a veteran trader, to embrace:
1. Learn how to manage risk.
Don’t get into large positions that you aren’t financially comfortable with. If you are worried about how much buying power you have left then it usually means you are in too many positions or have too large of a stock position.
In losing trades, know when to take a loss and admit defeat. I’ve been there too in those situations where I am bottom-picking a stock and it just keeps falling. My biggest losses come from those trades where I just refuse to take a loss “hoping” the selling will be over. If you get into a trade because of certain reasons and when those reasons are no longer present, it signals that it is time for you to get out.
2. Don’t be emotional when you trade.
Emotions cloud your judgment. This happens in every aspect of life – from personal relationships to stock trading. A successful daytrader needs to be robotic. After banking on a great trade, enjoy your win. However don’t bask too long in your success that it interferes with your next trade by influencing you to buy more stock than what your normally do because you think you are Gordon Gekko.
Learn how to move on quickly after a losing trade. You shouldn’t keep thinking about the loss. These emotions prevent you from making a comeback. Don’t blame others for your losses. You are the ultimate decision maker.
3. On every trade you make, understand why you made or lost money in it.
This will ensure that you stick with strategies and setups that work for your type of trading and your personality. As long as you learn something about the markets when you have a losing trade, you will benefit from this knowledge in the long run.
4. Don’t force a trade because you are bored.
I’ve done this so many times that I’ve noticed the majority of my forced boredom trades are losing ones. Overall, it’s better to just sit tight and wait for a proper trading setup to come about before pressing the execute button. However this does not give you an excuse to only place one daytrade per week. Don’t force your hand but give yourself a chance to make a trade if your trading strategies say it’s time to buy or short.
5. Acknowledge that successful traders don't have perfect batting averages.
It feels great when you win, but it is inevitable that you will lose money sometimes. It’s just impossible to win on every trade. Accept the fact that you will encounter losing trades.
6. Don’t be afraid to take profits.
One of my worst trading fears is selling too early and watching the stock rise another dollar. However, just like it is impossible to win on every trade, it is impossible to sell out at the dead top and buy at the dead bottom. Once in a while it does happen though.
If you are “happy” with how much you are making on a trade, it does not hurt to ring the register by taking profits or partial profits.