Source: tradethemarkets.com
- If you are hesitating to take a position, that indicates a lack of confidence that is not necessary. Just get into the position and PLACE A STOP. Day trading practitioners lose money in positions everyday. Keep them small. The confidence you need is not in whether or not you are right, the confidence you need is in knowing you will stick to your stop no matter what. Therefore you can actually alleviate this hesitancy to pull the trigger by continually sticking to your stops and reinforcing this behavior.
- Averaging down on a position is like a sinking ship deliberately taking on more water.
- Build up to a full position as it goes your way.
- Adrenaline is a sign that your ego and your emotions have reached a point where they are clouding your judgment. Realize this and immediately tighten your stop considerably to preserve profits or exit your position.
- Look for opportunities NOT to trade.
- You want to own the stock before it breaks out, then sell it to the momentum players after it breaks out. If you buy breakouts, realize that professional day traders are handing off their positions to you in order to test the strength of the trend. They will typically buy it back below the breakout point which is typically where you will set your stop when you buy a breakout. (In case you ever wondered why you get stopped out on a lot of failed breakouts).
- Embracing your opinion leads to financial ruin. When you find yourself rationalizing or justifying a decline by saying things like, “They are just shaking out weak hands here,” or “The market makers are just dropping the bid here,” then you are embracing your opinion. Don’t hang onto a loser. You can always get back in.
- Unfortunately, discipline is typically not learned until you have wiped out a trading account. Until you have wiped out an account, you typically think it cannot happen to you. It is precisely that attitude that makes you hold onto losers and rationalize them all the way into the ground. If you find yourself saying things like, “My stock in EXDS is still a good investment,” then it is time to start following the basic principals all professional day traders follow. (That would be protecting your capital, aggressively cutting your losses, and letting your profits run by not giving in to the temptation to sell just because you have a quarter profit).
- Siphoning out your day trading profits each month and sticking them in a money market account is a good practice. This action helps to focus your attitude that this is a business and not a place to seek thrills. If you want an adventure, go live in Minnesota for a winter. If you want excitement, deliberately forget your anniversary. Just don’t day trade.
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