I have traded my own account for many years, trying most styles before finding my particular niche - day trading grain futures contracts. What seemed important in those early days now seems largely irrelevant. Instead, I focus exclusively on a few powerful trading concepts. This article summarizes what is important to me now.
In order to be successful at day trading support and resistance, you must have confidence in your trading strategy. Most traders with less than 2 or 3 years of experience, and for those who are just starting to learn day trading...well, they have nothing to be confident about. (But, there is a strategy that really helps inexperienced traders, so don't be discouraged, we'll talk about it in a minute.) If your trading strategy isn't making you money consistently, in "real time", you can't have confidence in it. But, how can you tell if your method is any good when you don't yet have the nerve and discipline to trade it?
Day trading psychology involves building confidence, and consistent, profitable results will lead to confidence. Being a 27+ year veteran trader, my day trading advice for you would be to trade your strategy in simulation mode so that you can judge it rationally. The inexperienced trader (and even some traders with years of experience) has a difficult time thinking rationally when they are afraid of losing money, so take that fear out of the equation by utilizing simulation trading as a tool.
The most important thing, other than the money, trading system and market account, that a day trader need is the market information. Market data enables day traders to pick suitable products to trade. Day traders need live or real-time market quotes as a small delay in information can cause them huge loss. It is the trading system that they use serve for this purpose. Advanced systems provide these information as graphics and are usually have alerts and triggers to automate trades. Day trading systems also use technical indicators and various mathematical tools to facilitate the picking of stocks, futures, currencies, etc.
Having confidence in a method you have traded in simulation mode is the most rational starting point for a new trader, or any struggling trader. So begin the successful part of your trading career with a strategy that you personally have learned to trust through real-time trading (preferably simulated trading). Not all trading strategies are alike when it comes to day trading psychology, and this is important to understand.
Day traders work in short time frames, so trade profits are smaller. Where it might be reasonable for a position trader to target 100 points of profit over a period of several weeks, the day trader may realistically be limited to targets of 5 - 10 points. If trading costs for each trade are fixed at, say, 2 points, you can see that they constitute just 2% of the long term target profit, but may be 20% - 40% of the short term target profit. Unless a market has sufficient volatility for a trader to target profits significantly larger than trading costs, it is not suitable for day trading. Fortunately many such markets exist. Soybean and wheat futures are good examples. Suitable markets often have another advantage. Their periods of volatility frequently occur at specific times, typically short periods near the open and close of trading sessions. For example, I can usually enter my daily trade during the first thirty minutes of the trading session.
In order to be successful at day trading support and resistance, you must have confidence in your trading strategy. Most traders with less than 2 or 3 years of experience, and for those who are just starting to learn day trading...well, they have nothing to be confident about. (But, there is a strategy that really helps inexperienced traders, so don't be discouraged, we'll talk about it in a minute.) If your trading strategy isn't making you money consistently, in "real time", you can't have confidence in it. But, how can you tell if your method is any good when you don't yet have the nerve and discipline to trade it?
Day trading psychology involves building confidence, and consistent, profitable results will lead to confidence. Being a 27+ year veteran trader, my day trading advice for you would be to trade your strategy in simulation mode so that you can judge it rationally. The inexperienced trader (and even some traders with years of experience) has a difficult time thinking rationally when they are afraid of losing money, so take that fear out of the equation by utilizing simulation trading as a tool.
The most important thing, other than the money, trading system and market account, that a day trader need is the market information. Market data enables day traders to pick suitable products to trade. Day traders need live or real-time market quotes as a small delay in information can cause them huge loss. It is the trading system that they use serve for this purpose. Advanced systems provide these information as graphics and are usually have alerts and triggers to automate trades. Day trading systems also use technical indicators and various mathematical tools to facilitate the picking of stocks, futures, currencies, etc.
Having confidence in a method you have traded in simulation mode is the most rational starting point for a new trader, or any struggling trader. So begin the successful part of your trading career with a strategy that you personally have learned to trust through real-time trading (preferably simulated trading). Not all trading strategies are alike when it comes to day trading psychology, and this is important to understand.
Day traders work in short time frames, so trade profits are smaller. Where it might be reasonable for a position trader to target 100 points of profit over a period of several weeks, the day trader may realistically be limited to targets of 5 - 10 points. If trading costs for each trade are fixed at, say, 2 points, you can see that they constitute just 2% of the long term target profit, but may be 20% - 40% of the short term target profit. Unless a market has sufficient volatility for a trader to target profits significantly larger than trading costs, it is not suitable for day trading. Fortunately many such markets exist. Soybean and wheat futures are good examples. Suitable markets often have another advantage. Their periods of volatility frequently occur at specific times, typically short periods near the open and close of trading sessions. For example, I can usually enter my daily trade during the first thirty minutes of the trading session.
About the Author:
Frank Miller has a Debt Consolidation Blog & Finance, these are some of the articles: How To Find The Best Bookkeeping Services In New York You have full permission to reprint this article provided this box is kept unchanged.
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