Most people who are interested in day trading go into it bright-eyed and bushy-tailed and ready to buy low, sell high. After all, that’s all you need to do to make a profit in the market, right? While the concept of day trading is pretty simple, the execution of day trading is where professionals edge out beginners in just about every aspect.
Day trading is deceptively simple, but there’s a lot of underground knowledge about market movements that come into making the right calls at the right time. If you’re a struggling day trader or considering dipping your toe into trading waters, you should understand what makes this job much harder than it seems on the surface.
Your Mental State has Everything to do with How Successful You Are
Day trading at its core is about buying low and selling high, but one factor many people discount is the emotions that come into play when making split-second decisions. As humans, it’s hard to ignore our emotions. As a day trader, you will need to be able to regulate your emotions and sometimes even go against them to make the right calls. If you can remain calm in high-pressure situations and retain control of your emotions, you have a better chance of performing well as a day trader. Even if you don’t, acknowledging your feelings and understanding them better can help you in the long run. Most traders will experience overconfidence and fear at some point in their trading careers. How they deal with these emotions defines whether or not they are successful at day trading.
You Cannot Learn Day Trading in Just a Few Weeks
While you may think day trading is simple, the reality behind successful traders is their years and years of market experience. No matter how good you are at spotting patterns in technical analysis charts, if you don’t understand the big picture, you could end up losing lots of money. If you’re interested in day trading and curious about how the market operates, try running a paper money account first. Set up your trades to see how well you perform before putting any actual money on the line.
Sure, you’ll have regrets if you make a great play that could have resulted in a lot of profit, but you should chalk it up to a learning experience. You wouldn’t throw a toddler in a swimming pool with absolutely no instruction on how to swim, so why would you do that to yourself in the trading world? There are thousands of hedge fund managers and financial gurus that have access to more capital and more tools than you. As a small fish in a big market, you need to have a honed strategy that is executed flawlessly.
Even if you let your emotions get the better of you in heated moments, learning from those mistakes makes you a better day trader. Understanding where you deviated from your strategy or where your strategy had a flaw is crucial to improving your chances of making money in the market.
Understand that not every trade you execute will be a profitable one. The profitability of your trades depends directly on your ability to adhere to your strategy without letting your emotions take over. There’s nothing wrong with taking gains where you can, but protecting yourself with stop-loss orders and understanding market moves will help you become a more successful day trader.