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There are a lot of misconceptions surrounding the field of stock trading that trigger new trader’s fears and keep others from trying the profession at all. As a successful trader for over 15 years, I prefer to take a more positive approach and deal with the prevailing truths that exist in the field of stock trading. Here are just a few.
1.Stock trading success will come when you keep your trades low risk on a consistent basis over time. Yes, this approach will cause you to miss out on one or two bonanza jackpot trades that the media portrays to be every day opportunities. However, you will find that, over time, searching for those dream come true trades more often than not results in a fantastic loss that ends up deteriorating the portfolio you worked so hard to accumulate.Better to stay lower risk with steady profits over time if you are looking to make stock trading more than a hobby.
2.You don’t have to spend the whole day trading to thrive at stock trading.It does not have to be a nine to five job.Now, don’t misunderstand.I’m not implying that stock trading is another make money while you sleep angle.You must put in the time and the commitment to master the processes needed to be successful. But, by using GAP trading capably, I trade for two to four hours per day, plus one more hour of prep time.And, I earn a great living. With the right system, you can too.
3.Building on the knowledge and the experiences of other profitable traders can greatly accelerate your learning cycle.Don’t start from the drawing board because it will cost you a lot of money and ten or more years to make all the mistakes others have already made.It is just resourceful business sense to build on the knowledge of others.Didn’t your parents tell you “don’t reinvent the wheelâ€, but don’t we just turn around and do just that?Read books and articles by successful traders, take courses or seminars, find counselors or coaches to guide your progress.
Stock trading is often portrayed as mysterious and hard for “regular guys” to understand. Take it from a “regular guy”, that perception is not right. With the right systems in place and a working knowledge of the basic truths of stock trading, anyone can be successful.
To read about other lessons I learned in my fifteen years as a day trader and coach, as well as tips and techniques for becoming successful at stock trading, read my free report “From Video Junkie to Day Trader,” and learn more about how you could be trading stocks profitably in as little as two weeks.
For most people the idea of making money as a day trader sounds like something out of a movie. Buying stocks and turning around and immediately, reselling them seems foolish and usually can be quite difficult. If you simply believe that you will be able to walk right in and make a huge profit you generally discover that there is much more to day trading than simply buying and selling stocks. In order to really make money it is important to discover the exact details of the stock market that are important.
The first area that you need to work on is research. If you do not have good research skills then you need to work on sharpening them. This is not to say that you need to be able to look up every single detail in the encyclopedia within seconds, but you should be comfortable using the internet and various publications to help you locate information about companies, their finances and their stock performance. This type of information will be absolutely critical to your success as you attempt to get back firmly on track in order to be a successful day trader.
You should also work on improving your money management skills. Everyone always has room to improve here. Even those who are the best at managing their normal daily bills seem to have a bit of difficulty letting go of large amounts of money in order to invest. You need to learn the best ways to control your money, but also work to ensure that you are not investing on a whim. Whims are dangerous and could cost you a lot of money very quickly.
It is also a very good idea to spend some time just generally watching and learning about the stock market. Because of the extensive amount of information that moves very quickly around the market it is critical that you spend the time to learn the terminology as well as how the market actually works. Many people make the mistake of just diving right in. This can create disaster and must be avoided at all costs. If you are truly serious about trying to ensure that you get the best results possible you will find that it is extremely important to study up on how the market functions.
For the average person it should take a very limited amount of time to actually learn how the stock market operates. Being a day trader means that there is very little time to learn once you get started, so knowing the important aspects before you begin is positively critical. If you have any serious doubts or questions pertaining to your ability to get started successfully then you need to be certain that you spend the time required in a practice account. If you love taking risks though and have the time to dedicate to day trading this might be a great way for you to make the living you’ve always dreamed of making. This is a great job for those who love the highs and lows of a real roller coaster ride. Of course this is one job in which nerves of steel are a job requirement. Are your nerves strong enough to take the pressure?
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If making money while working a completely flexible schedule sounds like the life for you then it is a very good idea to spend some time looking around at the day trading field. With tons of people working for themselves at the hours they choose to work it can be extremely exciting and rewarding for a lot of people. Learning how day traders actually make their money though can also be very exciting and you are going to have that very opportunity right now.
Most people interested in the stock market have very little interest in exactly how the market works. They simply want to buy some stocks and watch their profits grow steadily over time. Someone who is interested in day trading however absolutely must take the time to thoroughly review the market. Additionally aside from just reviewing the market, it is very important to actually know all of the terminology and the important details that can seriously impact your ability to make a profit.
Relying strictly on the advice of a broker or agent is possible if you are planning to grow your profits over time. However, for those people who are seriously determined to make money as a day trader then it is very important to know these details for yourself. You absolutely have to realize that making money as a day trader is all about buying stocks when they are low and selling them when they are high.
The name came about because most traders would turn around and resell their stocks the very same day that they were bought as well. Taking this quick turnaround into consideration it is very important that you realize how the stock for each company can vary, and also how different financial factors can significantly impact the difference. For most people it is almost impossible to learn this all immediately, however if you take the time to carefully consider the company that you are considering it will allow you to make the best decisions.
A lot of time and effort goes into the day trading field. Most day traders are not quick to make a purchase or a sell. Despite the fast speed that is usually applicable to each transaction these decisions are not taken lightly. In order to truly make money it is important that time is given to the important factors that can impact your decision. Not everybody is going to thoroughly understand this concept though, and this is exactly how most people make a huge mistake.
Day Trading Online often has the impression that it is extremely impossible to learn. Most people discover quite quickly that day trading is still complicated but it is not as impossible as it may seem. For the average consumer learning how too effectively day trade really is possible, but it is very important that you take the time to thoroughly review all of the details pertaining to day trading before you get started. Everyone at some point has lot a ton of money, the important details include trying to be certain that you lose the least amount of money possible. Knowing that you are going to lose a bit of money can allow you to really review and explore your options, while still providing plenty of time for learning.
The goal is to of course not lose money, but this does tend to happen especially when dealing with financial markets that are quite unstable. A good day trader will know the exact signs to watch for when it comes to buying and selling stocks. Many people realize that buying less than $1 is obviously the best way to make money, but this is not always possible, which means your risk is going to grow significantly. Learning that there are plenty of risks and dangers involved as well as learning how to mitigate those risks can allow you to really appreciate the money that you can earn as a day trader.
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The desire to succeed lives on in most people, there are very few times when the desire to fail actually sets in, but this is a problem that does occur on occasion and if you are not careful you would quickly discover that you are sinking far into a trap that you cannot escape.
One of the best ways to get started as a day trader is to ensure that you are at least mildly proficient in the skills that are needed. After all, as with any venture, a few skills are needed to ensure optimum success.
Mathematics – This is an area that is very important because it can have a huge impact on the overall way in which you handle your transactions. You need to be able to at least determine how much you can afford to invest at a time, what price you need to sell at in order to make a profit and how much your transaction fees will be. Without knowing this basic information you will find that it is virtually impossible to get the results that you want.
Reading and Vocabulary – This seems rather basic but in truth many people do not know the proper vocabulary for the stock market. In order to be successful you need to understand the different terms completely. If you are talking to your stockbroker, you do not want to have to continuously pull out a dictionary to look up the phrases. Rather you need to know exactly what the key phrases mean, and how they can impact you, if you will be using them or if they are something that is only reserved for special situations or transactions.
Judgment – This simply means that ability to determine if you think a transaction is wise or not. Without this skill, you could find yourself sinking into trouble quickly. You need to be able to tell the difference between an obviously good transaction and an obviously bad one. For example, if you buy a stock at $5 a share, it would be very bad to turn around and sell them at only $1 per share.
Patience – The ability to remain patient even as you are sitting around nervously watching the stock tickers to see what your stocks will do is a skill that very few actually have. If you are overly concerned with how you are going to handle this then it might be a good idea to get a bit of practice in before you actually set off to engage in real transactions. You should work at calming your nerves as well, because stocks do shift in value almost continuously. If you sell too early, you will cut into your profits and potentially cause a loss, if you hold onto them too long you will again hurt your profits. Treading the fine line in the middle is critical.
Getting started has never been easier and this is the perfect way to begin your new career doing exactly what you like, at a relaxed pace. Within the stock market, you will find that day trading is not only stressful, but also extremely rewarding and will be worth your time.
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The stock market is a volatile place as stocks are bought and sold throughout the day for considerable profits and losses. The reason this is possible is because the prices of stocks fluctuate wildly during the day just as they fluctuate from one day to the next. This leaves the market open to those who relish the opportunity to profit off the pennies that others will sell to save. It can be quite a lucrative practice but carries with it a level of risk that is almost equal to investing in penny stocks.
Day trading is a particular draw for those who are addicted to gambling through trading stocks. It provides the ups and downs very similar to the roll of the dice or the ringing of the slot machines and instant hits and misses. It can even be addictive for those who have never set foot in a casino. Of course this type of investing isn’t the only investing that is very much like gambling. Any high-risk investment is going to bear some similarities, especially those that offer high payouts to those who do succeed on occasion.
The problem is that addictive gambling can be devastating to friends, family, and finances. If you suspect that you or someone you love has a gambling problem you need to either get help yourself or encourage them to get help. There are many ways that this can be accomplished and anonymous help can be found online. Day traders have gained so much notoriety as potential gambling addicts that gamblers anonymous has begun a support group specifically for those who are addicted to gambling via day trader trading.
If you have the personality that is easily addicted to things such as lottery tickets, slot machines, chocolate candy bars, etc. this doesn’t mean that you can’t ever trade on the stock market it just means that it might be a good idea to avoid some of the higher risk trading and stick with more slow and steady options such as mutual funds, CDs, and the like. Your rewards are likely to be better over time and you aren’t likely to experience the ups and downs that go along with activities that closely resemble gambling.
An addiction to gambling is a serious problem that can ruin a family financially. It is imperative that you get the help you need if you discover that you have a gambling problem. The first suggestion is to close up all stock market accounts that could lead to temptation. Removing temptation is always a great first step when fighting any addiction. You also need to seek support. There are many groups around the country such as gambler’s anonymous that can provide you a close knit support group whenever temptation strikes. If your local chapter has a group that is designed specifically for those who are addicted to gambling through day stock trading that might prove to be the best choice to help you on the road to recovery from your addiction.
If you have been addicted to gambling in the past you should also avoid the temptation that day trading may present. Addictions may be overcome but they are never cured and temptation for many can prove to be the fatal downfall. Do not allow your gambling addiction to take control of your life once again by entering into the world of day trading after working so hard to overcome your addiction in the first place and build a life after the sometimes devastating effects that addictions can bring.
Gambling is nothing new to the world and there is nothing wrong with having the sort of personality that likes to take a gamble on occasion. In fact, there needs to be a little bit of that personality type in every day trader. It’s when the gambling becomes a problem and takes over your life and your ability to make rational decisions about the money and the risks you are taking that it crosses the line between gambling and a gambling problem that borders on or is a gambling addiction. If your gambling is a problem get help straight away.
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With so many people looking towards the stock market as a way to make money, it is really important to take some time and really learn what you are doing before you go diving into something that you are truly not prepared for. The overall benefits of successful day trading are quite large, though the consequences can be substantial as well.
Taking your first venture into the day trading market is likely to be extremely scary. It is very important that you take some time to really ensure that you are doing ample research and this is where most people find that they are falling far behind the learning curve. From the simple jobs of teenage years to the more advanced jobs that are sought as adults there are plenty of jobs to choose from. Day trading is just one of the many options that you can consider but there are a few key signals that should tell you that it might not be the correct career decision for you. Once you have taken the time to clearly review the requirements you might determine that this is absolutely not for you.
Most people learn that day trading is wrong for them far after the fact. For example, if you prefer a job where you are able to work at a relaxed pace then you might not appreciate the environment. Most people discover very quickly that day trading is something that requires a great amount of attention to minor details also. If you are confused or unsure, exactly what you are doing you may find that it is very easy to make a mistake and fall into a situation where you have let some tiny minor detail slide by but it has now cost you a lot of money.
Other signals that day trading may not be right for you is a dislike of numbers. Of course, everyone uses numbers on a daily basis, from telephone numbers to so much more. But stop and think how do you really feel about some basic math? If this sends chills up and down your spine then day trading is likely to be the wrong choice for you as well. In order to have the correct results you need to take some time to avoid this by looking for either a solution to your dislike of math, or perhaps a new career. While many people opt to use calculators you should still be quite comfortable using them in order to get the right results.
You should also consider your comfort with technology. If the idea of using a stock trading software is upsetting and you have no idea where the internet is located then day trading is not for you. Most people who are successful at day trading carry with them at all time a device, which will allow them to connect to the internet. This can range from a pocket PC, to a laptop or even a smart cell phone. However, access to the internet at almost all times is something that helps to ensure updated information is always accessible. Coming to terms with all of these factors will help you to be positively certain that you make the right decision when you are considering day trading as your next career.
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Expecting a miracle? It probably will not happen. This article is written to deal with trying to trade out of a losing position, NOT to ignore stop losses. Ignoring stops is the surest way in the world to take all the money in your account and just flush it down the toilet. I am serious. While that might help you in the short run eventually there is a 100% chance you will have a massive loss, like 50% or more on your money lost that is invested in the trade if you don’t use a stop. In addition, you will accumulate a portfolio of losing positions and have no more money to trade with. Every huge loss starts with the trader refusing to take a small loss – often times as a result of taking a loss or a stopout and then watching the stock turn in their favor. So the thinking is “They are not gonna get me this timeâ€. This is how traders learn to trade with bad habits.
The first thing to realize, there are 4 reasons losses that can happen when you are in a day trading or swing trading.
1. Timing is off on the entry
2. The direction you think the stock will move is just wrong
3. News items come out and move stock or index against you
4. Your price target to exit is too far away
We will address these one by one.
1. Timing is off on the entry
If your entry timing is off, this usualy means the price will move a bit in your favor, then against you within the first 5 to 10 minutes. The amount the price moves against you will be way more than any profit so far, but it does not go to the stop area either. This can be identified by the price hesitating and moving up and down, just below your price for long or just above for short. It should not make a beeline against you and it should not go right near your stop in the first few minutes.
The easiest way to deal with this happening is to assume that your timing is going to be off. Enter long or short only one half to two-thirds the actual size you want in a position where you think the timing is right. To make sure this never happens, do not use market orders. Place a limit slightly below the current market quote, most of the time you will have no trouble getting filled. Obviously you need to be aware of the trade type – if it’s a breakout and you don’t think you will get filled if you don’t use market, then for sure just go in. Most trades will not just run immediate, including breakouts. Once you receive a fill back, make sure you place an initial stop loss for that position. Wait a few minutes and see what the stock price does. If it runs in your favor immediately, well then your timing was perfect – trade what you have OR look for the remainder on a small dip.
Most of the time the best deal is to stick with day trading what you have. If the stock moves against you more than for you in the first 5 minutes, but is not a beeline against you (meaning it looks like the trade will stop out etc), then put in an order to add at the low of this 5 minutes (for long) or the high (for shorts). If you are an aggressive trader, you can put in some additional orders and press bets above the high for longs or below the low for shorts. If you are not able to get filled on your better price add shares, the press bets additional shares will usually work out because this means there is not much selling. If the price moves so that you can add at a better price, then make sure you cancel the press bets add shares. If you get filled on your additional shares, you can move your stop down slightly but increase to include all shares OR just place a separate stop on teh add. If you get the press bets add, move your initial stop up to just below that low of the 5 minutes, and make sure you increase the shares.
2. You are dead wrong on the direction
This often happens to even the most seasoned traders. You try a breakout that fails, you try to catch a turn at the bottom of a downtrend, you think a stock will follow another stock with bad news down … the common element is you are dead wrong. Usually these types of trades will be self evident from the get go – meaning within a few minutes its already far further against you than it ever went for you AND it does not oscillate. By this I mean the upside is severely limited (for longs) or downside limited (for shorts). This means it can move easily one direction, but really, really struggles in the direction you bet.
Usually if you see this happening, the only chance you have is to try to double down near your stop. You are looking to risk another 15c to 20c on double size, betting it will turn in your favor before you stop out. If you want to attempt this, care must be taken to use discipline. Do not try to force making money on the trade. The thinking is to try to minimize the loss by catching a turn near the stop area, with minimal risk on the add. If you can cut the loss in half or even get to even, get out. Move on to the next trade.
If you doubled down and actually caught the turn, you would want to move the stop up on all to just below the turn. When the price moves halfway back from your secondary add position to the price of your first entry, sell the additional shares so you are left with only your original position. On the additional shares you want to keep you stop to just below that entry. The theory is the side that was pushing the price so far against you finally got washed out, so give the rest a shot. Because you made a bunch back with the added shares, if you get stopped you will lose less than if you did not do that. It is your call to decide if that is the best thing or to just exit all of the position with a minor loss and move on.
3. News events happen in real time and can cause the stock or index to move against you sharply
This is arguably a tough situation. Not only do you have to be able to read and analyze the news very quickly, you must decide what impact it will have on the stock price. The call is would this type of news cause the stock price to go far enough to hit the stop level? If the answer is probably yes, exiting at market before the stop will save you money. If you think there is a chance the news would not stop you out, the plan is to exit the position on a counter move the other way. Most of the time there is no good way to add shares to trade out of a news play where you get caught. Occasionally the market will react in way A, but a few minutes later they realize they are wrong (or someone made a bad assessment, and the market is changing its mind) and react in way B. If you can uncover and notice that this will probably happen, the add point is the high of the bar where the news came out. Most of the time that will run any stops and trap traders playing the news as a quick trade, forcing them out.
4. Your price target to exit is too far away
This is common to. You have to kind of guess based on how the stock has been trading, localized volatility, and support resistance points where a price move might go to. It is very common to think it can move to A, but it struggles to get to even half of A. Usually these types if you don’t monitor them real close will turn into losing trades. The main reason is a scale up seller (for long bets) or scale down buyer (for short bets) is betting the other direction and absorbing a lot of the volume.
Most chart setups will attract trader attention and the more obvious a trade looks but does not work or really struggles, the bigger th indication is to get out immediately. Some of these can result in a huge move the other way because they trap lots of short term money in the stock trying to trade whatever setup happened. There is no real method to add to work your way out of it, you really just need to pay attention. If the stock appear
s weak (meaning it should be going up but its not) and you think you should exit – usually this is the right thing to do. Your instincts are telling you something important – for the trade setup, the stock is not trading like it. Getting out is the best solution because you are looking to avoid your stop getting hit and saving a bigger loss. Also realize if you exit early, and then see it was a mistake, you can always get back in with a click of the button.
Do not expect to make money on every trade, its simply not possible – you have to pick your battles. If you sense something is off or wrong and you are at a loss, take the loss and move on. Sticking around and trying to always make money will actually result in bigger losses eventually. You can think of the God rule (just a catchphrase) – When a trade goes wrong, (God) gives you one chance to get out – it’s up to you to realize the chance and take it.
For many people it is extremely confusing what can be so hazardous about day trading but the truth is that it is a very dangerous situation if you do not know what you are doing. Making the wrong mistake can bring your dreams crashing to a halt, while the right decision can allow you to really enjoy the experience of engaging in the stock market.
Critical Strike 1. One of the biggest mistakes that people often make first is they completely forget about the importance of getting their financial affairs in order. This is important because you need to know exactly how much money you can risk in the market, and exactly how much you can potentially make. If you do not have the time nor the money to really invest in the market as a day trader you need to know this before you get started. On the other hand, if you have some money to invest in the market, but only a very small amount you need to know these details as well.
Critical Strike 2. Bad cash management will find you deep into trouble quickly. If you do not know how to handle your money outside of the stock market, you will find that it is much harder to do so effectively within the market. Take the high risks of the stock day trading segment and you have an explosive situation on your hands if you do not know what you are doing. If you really want to turn profits, you need to take some classes, learn to manage money slowly and then start branching out into other areas. Small amounts of time spent mastering the basic money concepts will be quite useful as you attempt to truly get a firm grasp of your finances and the stock market.
Critical Strike 3. Not keeping a tight tab on the amount of credit that you take. If you start amassing large amounts of credit that has to be repaid, you will find it is quite difficult to actually make the money that is necessary in order to break even just from your expenses, much less actually make a profit. This will leave you struggling and completely unable to pull yourself out of debt. Making wise usage of credit can be a great idea; however, you absolutely must take the time to avoid using it excessively. You will simply run your investments into the ground if you do not.
Critical Strike 4. Not having patience. This is a common problem to day trade, but easy to avoid. If you do not have patience, you had better find where to get it. If you have it, then ensure that you keep it. You simply cannot react to movements on the market without a high degree of patience. If you do react in a rash moment, you could cost yourself a lot of money. However, there are a few slim occurrences when acting quickly can actually be a good thing. Many people have made large sums of money this way, however far more have lost all of their money as well.
As you can imagine, the wrong mistake can quickly end your career as a day trader.You must take the time and effort to pull yourself together and work to avoid all of the problems that are possible to stumble into. Working to avoid these critical mistakes is not always easy, it can require a great amount of effort but is something that is typically not only feasible but also very easy to do. You should never feel as if you are going to simply fall into a trap that you cannot escape from. Using these 4 critical mistakes as a good guideline for avoiding problems you will be able to quickly and easily ensure that you are on the right path towards the success that you want. Proper care in the stock market will return great rewards, which you are going to appreciate for a very long time.
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