Successful day traders specialize and refine the use of one or two trading techniques and become experts in their execution.
Focusing on one or two strategies will bring repeated success. Every time someone brings out a new strategy, we run to it, hoping for the Holy Grail. Well, I have not found any Holy Grails in my day, but I have identified a number of tactics that bring repeated success.
Knowing how to execute a particular strategy and being able to find the stocks that are ready to move when you want to trade is the most difficult situation facing most day traders.
The Day Trader Experience
There are numerous advantages to day trading as well as disadvantages. Because day traders make more trades than, say, position traders, there are more opportunities for error.
Another disadvantage is that day traders often miss the larger profits earned by swing traders who accept the risk of holding overnight positions.
Successful Day Traders Adapt
Growth for day traders happens in stages. A smart trader will not expand risk tolerance until a certain level of profitability is achieved. When done correctly, the decision is based on actual results. Too many traders make the jump to increased leverage without the data to back up the choice.
Many simply increase trading size because they are pressed for money. This is usually a very bad reason.
As your P&L shows improvement, you can open the risk parameters and consider holding trades that close strongly in your favor. The plan is to to exit on the next day’s open.
Therefore, some day traders let successful day trades develop into swing trades. Confirmed day traders, however, always close their positions before the market closes.
The Primary Benefit of the Day Trade
An advantage to day trading is not holding stocks overnight. In this market, anything can happen which might cause stocks to gap against you at the open. I am wired as a day trader and just hate worrying about a position when the market is closed.
Finally, if you wish to day trade, you should be willing and able to sit in front of a computer all day and monitor a trade. If you cannot, then you can trade in the intermediate or long-term time frames.
If you make this decision, you must make trade adjustments as a swing trader and not a day trader. This means you should not be watching every tick so you don’t micro-manage the position.
When you mix trade goals and trade management you will be stuck in a mindset that will lead to hesitating. To avoid this so you can day trade successfully you must commit to a strategy. If you do, your odds of success increase with this greater clarity.
