Last updated on February 8th, 2020
The Netpicks group of traders has put together a list of the best day trading tips we could give new and experienced day traders.
Day trading has changed over the past decades as technology has made it easy for anybody to get involved in the markets.
The pitch was you could work from home with little capital, little skill and have all the freedom you could ever want.
Reality is different and many who thought they were day traders were actually just pushing buttons hoping for the best. Many still live in this fantasy and never look at trading as a viable profession…one which demands a disciplined approach and realistic expectations.
Day Traders Can Prosper
It is not all doom and gloom because there are many who make a great living either working at a firm or in their own trading business. This shows that it is possible.
Failure in trading does not have to happen to you.
Trading involves not only the mechanical aspect but also the internal work on yourself. I can honestly say that most people I talk to, the mental game and finding who they are as a trader is not high on their list of topics. That is a huge mistake.
Day trading for a living is possible for those that approach all aspects of the trading business above and beyond the method they use to trade. It requires a total package to be successful and for those that embrace that, they have a good chance of finding some level of success.
7 Best Day Trading Tips
There are so many tips that people will give you when embarking on a day trading career whether it’s Forex, Futures or even stock trading. I am going to skip the most common trading tips and list some day trading tips that I have found particularly useful over the years.
1. Take full responsibility for everything that happens.
Far too often you will hear traders complain that the market was out to get them. The truth is that for most of us, the “market” does not even know we are there. If your stops are being gunned for example, then you have put them in the same place as many traders have.
It’s no accident that price can and will breach a level, take out stops and then continue on its way.
If you are to point fingers everywhere but at yourself, you become a victim and that is not an empowering state to be in. Things happen and at the very least, the only person who put you in the trade was you. Those sharp news driven events that nail your stop and bring about slippage only affect you when you are in the market.
Whatever happens, take responsibility for it.
This is probably the hardest trading tip (although it applies to the world outside of the market) because it forces you to acknowledge that you are accountable for your own success/failure. It is tough to point the finger at yourself especially when it comes to losing money.
But pointing at yourself and being accountable is exactly what we all need to do.
2. Don’t focus on the money
We are in this business to make money so it makes sense to focus on the money, right?
You should certainly focus on the money when it comes to setting your risk but to focus directly on the money can make us do some silly things.
Focusing on the money can cause you to move your stops further from price, take small profits in fear of losing what you have and jump in to not miss the move. Those are not conducive to longevity in trading.
Price is going to do what it is going to do regardless….of what you do. Most of us can not directly influence the outcome of any trade but there is something we can easily do.
It is assumed you have found a method to trade and also have a plan to follow. You’ve tested the plan and found your wins are larger than your losses and perhaps you lose more often than you win.
What you can do…what you can focus on…is executing the trading rules you have tested and let the chips fall where they may.
That is all we can do.
When the variables line up for an opportunity according to your trading plan, you don’t hesitate. You execute, manage the trade and leave the outcome to the random distribution of wins and losses.
Keeping your eye off of the the profit/loss column while you are trading can do wonders for your consistency.
3. Accept that risk control is paramount
We all look for the greatest entry when we first start to trade because we think the setup is where the money is made. Logically, it makes sense because we have to get into the market somehow.
What you do AFTER you get into the market and your money is on the line is vital for day trading, swing trading and position trading.
Profits add to your account but the losses can take you out of business.
Be an exceptional risk manager and ensure that whatever you are putting up per trade, can handle multiple losses in a row.
If price is approaching your defined stop level that you placed according to your plan, take the loss and move on. If you let that loser run to the point of extreme pain where you are forced to exit, you may never recover your capital.
I want to add that many traders place their stops close to the turning point or range break because they can have a bigger position size. The problem is that you become part of the cluster of stops that the bigger fish know where they are sitting. We’ve all had it happen where we get stopped and price reverses in our intended direction.
Putting your stop outside of the usual zone may decrease your position size or negate the trade for you (account size is too small) but at least you won’t be part of the herd that just got hit.
4. Be stingy with broker fees and other costs
While most brokers will try to stay competitive, you should always be on top of the fee structure of the one you are using. From “clearing fees” to account management charges, all of these will eat into your profits.
Trading is a business and like all good business people, you should try to limit your costs without sacrificing the quality of the services you need. Do you really need to pay the commissions of a full service broker if you are strictly independent?
On the same note, platform fees, paid trading indicators and other trading software can also be an issue and you should evaluate your need for the trading platform that has all the bells and whistles. For me and how I trade, as long as there is no lag time and the platform is not a resource hog, I can live with it.
5. Accept that a winning trade against your rules is a loser
Picture that the market is making a huge push to the upside and not wanting to miss the move, you jump on board. The price keeps pushing north and at the first sign of weakness, you market out of the trade and bank the biggest one trade point total you’ve ever had.
Like those that took the first cigarette drag and loved the feeling, it’s only a matter of time before you will be damaged. Often times that damage can not be reversed.
Being rewarded for a lack of discipline can virtually ensure you will do it again and that is why you can not congratulate yourself if you win.
Take those profits and donate them so your bad play can actually do some good because for you as a trader…..it is damaging.
The best thing to happen to a trader that is undisciplined is to take a loss so there is a negative outcome to something they should not do. Make your trading plan and anything that falls outside the parameters of that plan is off limits.
6. Set your trading business hours
It is very easy to trade around the clock but ask yourself: “If a boss asked me to work outside my set hours, would I gladly do it?”
Most people would probably answer no but because we have access to markets around the clock, traders want to find opportunity when they can.
We trade to live and not live to trade so it is important to find structure when it comes to your trading hours.
Interesting enough, people say they trade for freedom but end up being slaves to the “round the clock” features that the markets offer.
Perhaps you have a pre-open routine where you check news, overnight action and depending on the type of trader, you find the support and resistance levels where you will look for opportunity.
Then, for those in North America, you are ready for the New York opening bell and will dedicate 2-3 hours of intense focus to your day trading.
Barring that, you come into the afternoon session after the “doldrums” and trade the last few hours of the day.
The rest of the time, you are away from the markets or perhaps doing testing, your trade journal, trade log or spending time with the family
Most of us want the freedom that trading can provide and that includes set times you work and times that you don’t. Intraday trading can help build your wealth and allow you to make a living but can also prevent you from having the freedom you originally were seeking.
7. Trade from a balanced frame of mind
Trading can have an emotional impact (however slight it may be) but coming into your trading day unbalanced can make it worse. Being focused on external issues outside of the trading world can also cause issues with your ability to function according to your trading plan.
Those times of stress we all face are the best times to step away from the charts and stay flat.
Our psychology has a massive impact on the success or failure we will find so it is in your best interest to approach the session in a balanced frame of mind.
You also want to stay away from the “risk taker” mentality and also the flip side where caution prevents action. How you feel on a particular day can actually influence either one of those and cause you to deviate from the trade strategies you have tested.
How you approach your trading day from a place of calm is something you may want to work on. Whether it is mediation, music or affirmations, being balanced during your session is another cog in the wheel of success.
The Biggest Trading Tip Of All
I touched on this one a few times and it is so important, it deserves its own section.
Have defined rules for entry, exits and risk management
Many want to learn about trade entries and as mentioned, the criteria has to come inside a complete package.
The entries you find are the only ones you should be trading and there should be no “let’s see if this works” which is simply a lack of discipline. There is not and never will be the “perfect entry”. It does not exist.
There will never be a perfect exit.
What will be perfect is your unconditional commitment to trade according to the plan you have tested and become proficient in. To this day, I find this to be a challenge.
I may have something I am looking for and it is difficult to not utilize other “variables” in addition to the original criteria. It can be a challenge to ignore what you know and it can be something as simple as also seeing a minor channel breaking out in addition to my other criteria. The problem is that the minor channel breakout is not something I was looking for so it should not influence my course of action.
I take responsibility that it is something that I continually must work on. I know that time and experience will deal with that as long as I do not act upon the outside the plan variable.