7 Tips for Successful Day Trading

Day Trading, while not as challenging as Scalping, still presents a complicated challenge. It requires skills that go beyond the characteristics traditionally assigned to traders by the collective imagination. These skills relate to mindset, personality, and stress resistance, even more than technique and analytical skills.

Aware of the difficulties that can be encountered when practicing Day Trading, Netpicks Trading Strategies has compiled 7 tips for users who intend to engage in daily trading.

Netpick Trading Strategies is one of the leaders in the US trader education landscape. It has been prominent for over 20 years, supported by the contribution of professional traders who share their knowledge and experience to stimulate a growth path for less experienced traders.

7 Tips for Successful Day Trading

Below are the 7 tips that, according to Netpick Trading Strategies, "daily" traders should follow.

Taking Responsibility

In most cases, the market moves in the opposite direction of what was expected. Often, even in hindsight, it's difficult for a trader to understand what happened. At that point, it's easy to blame the market or a presumed irrationality of investors. However, this kind of thinking, regardless of its degree of truth, is detrimental and can significantly harm trading activity.

Also because, in most cases, while one trader is losing, another is gaining. Evidently, it cannot be the result of chance. Therefore, Netpicks Trading Strategies always advises taking responsibility for one's losses. Of course, it's not easy: in trading as in life, admitting mistakes is a painful process, given the implications in terms of self-esteem.

Yet taking responsibility for what happens in trading is a smart move for at least two reasons:

• It inspires an approach aimed at humility. It's useless and harmful to maintain a presumptuous behavior, since the market always plays the role of the wolf.
• It allows learning from one's mistakes. If a mistake has been made, as happens in almost all cases, admitting the error is the first step to not repeating it and thus improving performance.

Focusing Too Much on Money is Dangerous

Those who practice trading, whether daily or swing, etc., do so to earn money. So it's right to focus on money, right?

No.

According to Netpicks Trading Strategies, and common sense, one should focus on performance more than money. The reason is twofold.

Focusing on money, or the end result, generates undue pressure. Becoming rich through trading is very difficult, and it's a goal that is achieved after many years (if one is able to achieve it). Thinking about earnings right from the start means putting the cart before the horse. Moreover, according to many traders, it leads to performance anxiety that borders on unsustainable.

The true goal is growth. No one can improvise as a winning trader. This applies to all types of trading, and even more so to Day Trading, which is characterized by a high degree of difficulty. Therefore, the trader is called to undertake a journey, at the end of which "wealth" appears as an achievable result. But in the meantime, it is necessary to grow and improve, regardless of the size of the account. Therefore, at least for the first few years, it is better to focus on performance rather than the portfolio.

The corollary of this reasoning concerns respecting (self-imposed) rules and controlling risk. We will discuss this in more detail in the next article.

The Importance of Risk Management

Making a successful trade is obviously pleasing. In a sense, it's worth the effort of analyzing the market, planning the entry and exit, etc. However, while profits benefit the health of one's trading account, it's the losses that determine presence in the market. If losses are excessive, the trader risks closing up shop. It may seem trivial, but it's a conviction that inspires, or should inspire, a real paradigm shift.

Whether you are an experienced or novice trader, you should worry about containing losses rather than forcing your hand in search of profit or a winning trade. Therefore, in simple terms, you should manage risk as effectively as possible. Managing risk does not mean eliminating it, since it is impossible to achieve such power (in trading as in life). It means, quite simply, knowing in advance the maximum loss a trade can generate and planning your moves based on this important data.

Managing risk means defining the perimeter of your actions. A perimeter that, presumably, allows the trader to remain in the market no matter what happens. Risk management techniques, which often overlap with or depend on those related to money management, are numerous. It's up to the trader to select and implement those that best suit their trading style and personal history.

How to Manage Costs and Commissions

The issue of costs and commissions is somewhat controversial. Generally, a distinction can be made between Market Maker brokers and ECN brokers. The former offer a guarantee of order execution, do not require commissions but generally impose quite high spreads. The latter do not impose any spread, allow trading at real prices but require commissions. There are obviously exceptions, and not a few: some market makers, for example, may require both commissions and spread (this often happens if there is a bank behind the broker).

In any case, the trader is called upon to do a cost-benefit analysis. Since a large part of the costs is made up of additional services, or the possibility of accessing assistance, one should ask: do I really need all this? The goal is to minimize expenses without compromising the quality of one's trading activity.

This is a need that all traders should feel. Even more so for those who practice Day Trading, which by definition involves a high number of orders. If commissions persist, it's clear: profits risk being almost completely eroded by costs. Therefore, pay close attention to the broker you rely on: choose it also based on this important parameter.

A Winning Trade is Not Always Good News

This phrase reveals an apparent contradiction. How can a winning trade not be good news? After all, we're talking about profit! Yet there are cases where jumping for joy when placing a successful order is not exactly the best thing to do. It happens, for example, when the gain is the result of chance or, more prosaically, is not the result of the work done on one's trading system.

If the trade was victorious despite not following one's trading system, at least three problems emerge:

The trading system may be inadequate. In the best of all possible worlds, the trader wins when following his trading system and loses when not following his trading system. In the case just described, a very important doubt emerges: namely that one's trading system is flawed.

The result is not easily replicable. Those who operate and win outside their trading system run a significant risk: namely not being able to replicate the performance. Also because it could be the result of chance.

There will be a tendency to go against one's trading system. A deviation from one's rules may occur. However, when you win following a deviation, the risk of the exception becoming a habit is high. This is always bad, also because outside the rules (even if self-imposed) there is only chance and gambling. Before abandoning one's trading system, it is necessary to carry out tests and counter-tests... A single winning trade is not enough.

The Importance of Establishing a Perimeter

What perimeter does Netpicks Trading Strategies refer to? Essentially, a time frame. In short, the advice is to decide in advance a number of daily hours to dedicate to trading and to stick as closely as possible to this self-imposed directive. It may seem like strange advice. After all, one of the reasons why people aim to replace work activities with trading is precisely the possibility of enjoying significant flexibility in working hours.

The problem, in truth, is not flexibility, but rather a calculation of the profitability of trading activity. Also because time, after all, is money. If too many hours are spent on trading, the risk is that the activity will be unprofitable even potentially (since talking about earnings in the early stages of a career is almost out of place).

Moreover, not setting time limits is dangerous for two other reasons.

There is a risk of putting social life in the background. If a perimeter is not drawn, social life could be compromised. This is not a remote possibility: many traders, in the beginning, have experienced this "descent into isolation". A descent that, logically, is not at all desirable.

In the long run it negatively affects performance. It's logical: if you lead a stressful life, where there is little room for fun, leisure, and loved ones, it affects your mood. And if a trader is sad, or even depressed, it will be difficult to trade successfully.

The Importance of Having a Balanced Mindset

Netpicks Trading Strategies' advice is to pay close attention to the psychological sphere, i.e., the combined complex of emotions, hopes, and approaches that, inevitably, affect trading activity. Netpicks, echoing the opinion of the most famous traders, puts forward a simple reasoning: trading and psychology go hand in hand.

Therefore, it is absolutely necessary to cultivate one's psychological sphere, that is, to seek a balanced mindset aimed at optimizing one's performance.

The rules to follow are numerous, stringent, and difficult. For example, it is good not to get discouraged following a defeat and, similarly, not to give in to euphoria when profits are generated.

In general, the goal should be to seek, day after day, an emotional balance, such that one's psyche cannot stand in the way between the trader and his goals. It's not about reaching an ataraxic state, but it's close. Emotions, while being an ineliminable component, risk doing more harm than good.