Day Trading Psychology
Anyone can day trade, whether the market is up, down or going sideways. If you think about it, during the last boom you would never see a trader down & out. How you might ask? The answer is simple. They made an unbelievable amount of money trading the stock market. They went in, took the money & got out before the markets fell.There are still a lot of these people around today getting ready to go into the next Bull market to do the same thing all over again, many will invest in a good trading course while others will just jump right in. Most people know one or two of these people but what they don’t know is what they do exactly.
You’ll always here a story about Peter or John whose a big shot on Wall street, he’s a real Guru, he’s made an absolute fortune, he owns several houses, sports cars, villas & a couple of business thrown in to boot.But its always the same, you’ll know these guys work the markets but they’ll never tell you exactly what they do & if you get too close they’ll throw a load of complicated charts at you, you’ll look at them, wont understand a thing & give up. This is what they want, why? Because Peter or John won’t enjoy driving around in a Porsche if everyone else is driving one too.
You see, having money is power, having what everyone else can’t have is a great feeling. People at the top want to stay there & this applies to any business, they will never tell you the full story of their business, they’ll just outline it & keep you guessing. Imagine if Warren Buffet told everyone his business, he wouldn’t be the second richest man in the world today because everyone would have copied him. All of these people have a different outlook on money. They know the real power of financial freedom, they know money makes money & once you’ve made your money, its almost impossible not to make more, just think of it, over 90% of the wealth in America is owned by only 5% of the population. The vast majority of us live day to day, we worry about our mortgage, our car loans, our pensions, whether our kids will have enough to get by when we pass on.
However these people who’ve made a good bit of money don’t have all those worries & they can go on to take calculated risks without worrying about losing it all. This is what day trading offers. You can make a lot of money very quickly & if you know what you’re doing, keeping your losses to almost nil.Don’t get me wrong, it is hard to get your head around the real psychology of money & all its rewards & trappings. Try this. Take 2 cents & double it every day for 30 days. What do you get at the end of the 30 days, a whopping $10’737’417.00. That’s right, unbelievable, get a calculator, try it out yourself. This is the amazing properties of compound interest at work.
Some of the problems of day trading are not technique but the emotional factor of making a trade. The fear of losing a trade can be quiet crippling. Just one loss can stop you from making many profitable trades in the future. Don’t let yourself get caught up in this cycle. If you make a losing trade, so what, you’ve entered your stop loss (we’ll be talking about this later on) so you’re covered. With our method you’ll be making many profitable trades so you won’t even notice the ones you lose as they’ll be so small in comparison.
Poor Risk management is probably one of the most important lessons you’ll need to learn as a day trader. It is imperative that you know where you stand before entering a trade. There is no point entering a trade & getting all hopeful that the trade will suddenly fly up & make you a millionaire over night. It doesn’t happen this way. You have to plan out your finances, how much can you lose? How much can you lose every week before it affects your finances? Keep a record of every trade you make either good or bad, add it up at the end of every week. Once you’ve put this into practice it will be a lot easier to day trade.
We all want to get rich very quickly & yes it can be done but only if you put your mind to it. Jumping into a trade & hoping it will go up is not the solution. Invest in a good trading course & plan out each trade well in advance & know your exit strategy off by heart.Freezing up while making a trade. Will I go in or won’t I go in. This is a very difficult emotion to deal with. You wait & wait to see if the stock is rising & before you know its gained 5% & you’re too late to get in. You’ll pat yourself on the back & tell yourself that you were right about that stock & you’ll definitely go in tomorrow. Of course you do the same thing the next day, just watching as the stock rise but never committing to a trade.
I find the best way to deal with this is to just make the trade, put in your stop loss & walk away from your PC. Come back an hour later. If your stock has gone up well done, increase your stop loss to lock in your profits. If it’s gone down, hard luck, it does happen. At least your stop loss has saved you from losing even more money. Re-study the trade to see where you went wrong & apply this to future trades. Go back in the next day & trade again; you’ll be surprised how fast you’ll start picking winners again. Learn more by nathan michaud tips in trading.