Can You Learn to Day Trade?

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Learning how to trade is completely possible. It comes down to the right mix of "ingredients" that will produce a winning trader and more importantly a winning mindset.

Well in this post, I will walk you through 9 elements which have helped guide me on this journey.

#1 - Trade Less

The first thing people think of at times is that day trading comes down to placing many trades throughout the day. This couldn't be the furthest thing from the truth. You can be a day trader and only place one trade per day.

It's not about the amount of activity that somehow lets you in the club. This is not a knock to my scalpers out there, but the point is if you are starting out it's not about placing 100 trades per day. It's about knowing why you are trading, so you are not out there just swinging for the fences. [1]

If you are really new at trading, it's probably best that you only place three trades per week. The first reason is that it limits your exposure to the market, which allows you to dissect and process your trading activity.

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The second reason is that it allows you to day trade with less than $25,000 dollars which means you can only place 3 round trip trades per week anyways. [2]

Bottom line, give yourself time to learn the game before increasing the number of trades if you ever need to increase it at all.

#2 - Trade Small

The other misnomer out there is you need to have a lot of money to make money in the market. One of the biggest accomplishments of my trading career is when I took a $3,500 dollar account up to $7,500 in 5 months. You would have thought I hit the lottery of life.

If you are unable to make money trading a small account, you will not have any greater success plunging thousands of dollars in the market.

Remember, time is on your side and the only one rushing is you.

#3 - Become an Expert of One Strategy

There are traders that are able to trade 5, 7 or even 10 patterns effectively. Well, guess what? You only need one pattern to work for you to make a living trading.

For me, I really only trade two patterns. The morning breakout and the morning pullback.

Now, I don't always get it right and sometimes make some bonehead mistakes. But focusing on these two patterns has allowed me to perfect my entry, stop and exit rules. This has resulted in me being able to turn a profit on a weekly basis regardless of how the broad market is trading.

Below are examples of the trades I look for every morning.

#4 - Master Your Craft

Study

Study

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Please do not make the mistake of buying a trading course, looking at it once and then going out here and trading with professionals.

Trading is like any other specialized skill. It requires practice and then more practice.

You have to put in the hard work if you want to be a success.

This doesn't mean trading only when the market is open. This also means you put in the time outside of market hours. For me, I love to review trades over the weekend.

It's like everything slows down and I am able to process the charts in front of me with such clarity.

#5 - Journal

Journal

Journal

Show me a struggling trader and I will show you a trader that does not journal on a regular basis. As a trader, you need to be more of an analyst than a technician. This means you need to figure out not only what system works but how you are trading within that system.

Journaling allows you to not only review your trades but also your mental state when placing those trades.

Dr. Steenbarger talks about journaling not only trades but your psychology. He says traders should track their trading emotions across three areas: (1) behavioral patterns, (2) emotional patterns, and (3) cognitive patterns. [3]

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For me, I have never had a losing streak when I was journaling.

It's only when I start trading without tracking my performance do I run into problems.

#6 - Take Money Out of the Market

Cash

Cash

You need to take money out of the market, so the reality of what you are doing hits you. If you do not take the money out it will find a way to leave you.

There are those that can just compound their returns day after day. But for us mere humans, taking the money out of the market helps with the psychological barriers that prevent us from having breakthrough success.

Similar to your job or profession, you would not come to work every day and not get paid.

#7 - Focus on One Time of Day

I cannot trade the midday for my life. Those of you that follow the blog know this because I have been very transparent about my struggles.

However, put me in the morning and I can generally walk away a winner.

One of the first things you should do is focus on a specific time of the day and commit.

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So, if you are going to day trade the morning, then do that and do it with conviction. If you are going to trade wedge patterns during lunc, then do that as well.

Lastly, if you want to trade end of day patterns to see if you can catch the final push higher, that's okay as well.

But please, please do not try to trade all day when you first start. I literally could have saved thousands of dollars and countless hours of headaches if I only followed that one rule.

#8 - Be Prepared for the Long Haul

Trading Journal

Trading Journal

If you are going to trade then that's what you are going to do. Do not get in the game, only to quit a few months or even a year after starting.

Treat this decision like it is irreversible. Now, this does not mean go down a blind path of financial ruin. It more means you are going to take a mature and methodical approach to learn how to trade.

I still believe anyone can learn how to trade, it just takes a person sticking in the game long enough to learn what works and how to become a successful trader.

#9 - Read About Other Self-Made Traders

At times you will need to find inspiration to keep going. Now I don't suggest you google millionaire stock trader, because this may bring out the greed which you need to keep under control.

I highly recommend you read books like Momo Traders or Zero to Hero which are more interview-style publications. This will allow you to get into the psyche of these traders to see what makes them work.

Again, I am a firm believer it's not about the strategies, but more about learning what makes some traders tick and how they are able to win and win on a big scale.

How Can Tradingsim Help?

If you are looking to learn how to trade, you can test out your strategies in the Tradingsim market replay tool.

External References

  1. Dr. Steenbarger, Brett. (2010). How Do I Avoid Overtrading?. traderfeed.blogspot.com
  2. Pattern Day Trader. Wikipedia
  3. Dr. Steenbarger, Brett. 'The Daily Trading Coach'. John Wiley & Sons. p. 43

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Al Hill Administrator
Co-Founder Tradingsim
Al Hill is one of the co-founders of Tradingsim. He has over 18 years of day trading experience in both the U.S. and Nikkei markets. On a daily basis Al applies his deep skills in systems integration and design strategy to develop features to help retail traders become profitable. When Al is not working on Tradingsim, he can be found spending time with family and friends.
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