Whether day trading, scalping, or investing, there are fundamental skills that each trader should master. Skill-building activities will help you sharpen your ability to make money and cash in on critical market movements.
1. Don't Be a Perfectionist
Consistent profits are achieved from winning more than you lose - not winning every single trade. There are plenty of professional traders who generate profits by winning just 10% of their trades by maximizing gains and minimizing their losses.
2. Stick to a Trading Plan
Developing a trading plan is extremely important. Day trading around your own set plan for each position will produce consistent profits. A trading plan planner should be your best friend when developing your own trading style. The key is sticking to what you've written down on paper.
3. Know the Odds
You should know the payoff odds for each trade that you take. Scalping produces large gains from small movements with higher risk than swing trading. Your trading plan should include a way to regulate how much capital you're willing to risk on each position - but you should never risk more than 2% of your total account value.
4. Complete Trading Plan
The skill to plan is the most important. A complete trading plan should be more than just "trade everyday from 9-3." A plan should include how to act in upswings and downswings and how to protect your capital. In many cases, a thin plan is worse than no plan at all. Stick to your guidelines to get the most out of each trade.
5. Ability to Keep Emotions Under Control
It's hard not to be emotional with hundreds or thousands of dollars on the line each moment of the day. Think like you would in a survival scenario; you've got to be calm and keep your head above the water. Many traders slip from their plan and take positions to cover losses only to lose more money. Over time, a complete trading plan will produce consistent profits, but only if you believe in it.
6. Know How the Market Responds
After getting some experience, you should be able to know how the market responds to certain events before they happen. If there was a negative Non-farm payroll statistic last month, and the Dow lost 60 points, it would be smart to consider that the same would happen again. History does repeat itself in the financial markets.
About the Author:
Leroy Rushing is an active, professional day trader; trading coach; and author. He is the Founder and CEO of Trading EveryDay, a provider of educational trading products and services that are available worldwide. Trading EveryDay has complimentary/FREE products, a Tools of the Trade eBook and a Trading Room Report, that are downloadable for your convenience.
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Course Day Stock Trading
