While it doesn’t take much to make one or two successful trades now and then, if you want to make it into an everyday thing then you are going to need to work at getting into the mindset of an effective day trader. While no 2 day traders are the same, those who are successful at the practice all tend to exhibit many of the same positive characteristics and traits outlined below.
Early riser: Despite the fact that the market doesn’t open until 9:30 am, the most successful day traders like to get a jump on the day and use the early morning hours to track the international markets so they know what will greet them when the local market opens. No economy exists in a vacuum and knowing what is happening in the world will give you a better idea of what type of changes the day will bring. Having an accurate macro view is crucial to determining the right micro changes to follow when the time is right.
Practice, practice, practice, and practice: Day trading is a skill which means that just like any other skill it will only improve with practice. Common wisdom dictates that it takes 10,000 hours to become a master at something which means that if you want to become a master day trader then you will need to commit 8 hours a day, to the task for 5 days a week for 57 months. While some traders are just naturally lucky, if you ever want to see a huge payout of your own then you need to be willing to work for it. Remember, successful day trading is a marathon, not a sprint, slow and steady wins the race.
Make learning a habit: Being a successful day trader means never resting on your laurels no matter how productive your current strategies or trading plan turns out to be. Rather, it is important to never be content with the status quo and always be on the lookout for the next big thing. New strategies are always being developed and if you don’t stay on the bleeding edge then you will find yourself losing out to the competition. Additionally, the market is constantly changing which means that if you are relying on information that’s even a few days old you can find yourself blindsided by market trends that you should have seen coming. This is why it is important to get into the habit of continuous learning and never let the habit go fallow.
Know when to follow your own path: While following the major players in a given market is often a solid strategy, that doesn’t mean you should just blindly follow the crowd all of the time. As a successful day trader, you should be doing your own research and trusting the results you find, even if it means going with a trade that is currently unpopular. If you are looking for a serious payout, then trading against the market is going to be the way to get you there, but only if you do so for the right reasons.
A majority of the movement in the market each day is from sheep who follow what everyone else is doing with no regard for the reasons why they are doing so. Don’t fall into this pattern, be a wolf instead. Improve your intuition through diligent study and constant practice. Once you start to see the payoff from doing so your confidence will improve and you will find it easier to trust yourself in the future.
Be prepared: Truly successful day traders have a reliable plan that they can stick to without fail. That doesn’t mean that they will blindly follow their plan in all scenarios, however, as they have also cultivated the ability to read the current state of the market on the fly in an effort to determine when things have changed enough to warrant going off book until the market settles down. In order to be able to go off book successfully you are going to need to banish all emotions from your trading and focus on logic to the exclusion of all else. If you start trading with your heart instead of your head, the only thing you will achieve is failure.
Know strengths and weaknesses: The most successful traders are those who are in tune with themselves through a close examination of their strengths as well as their weaknesses. Following their example will allow you to make the most of the one while minimizing the effect the other has on your day to day trading experiences. This will help you minimize the risk inherent in the trades you make, maximizing your profits in the process. The easiest way to go about doing so is through the use of a trading journal.
You are going to want to keep detailed notes related to all the trades you make to help you determine personal patterns that otherwise may not be visible. This means you are going to want to keep track of not just success and failures, but how given trades were determined and your emotional state throughout. Once you have enough examples to see the patterns you will want to strengthen the positive ones through conscious usage and do your best to minimize the negatives.
Commit at the right time: No matter how thorough, all the research in the world will never help