Trading Tips I Give to Every New Day Trader
4 day trading tips related to the most common questions I get from new traders.
There are typically four types of questions I get asked the most by new day traders. These questions fall into four broad topics: what to watch/monitor while day trading; how to day trade; how to gain consistency/overcome pitfalls; and how long does it take to succeed.
In brief, here are four day trading tips--related to each one of these questions--which help you hone in on what you should be working on, and how to start building consistency to succeed.
What To Focus On When Day Trading
To day trade you need live charts, a broker (demo or live) and a reliable internet connection. You will also want access to an economic calendar so you know when major economic data releases are--these can cause large instantaneous price moves you don't want to get caught in. That's all you need (well, and some trading capital, unless you are demo trading).
All the information you need to trade is right on your price chart, except the economic data release times. Once you know when high impact economic data is released, make a note of it on your chart, and avoid trading for several minutes around that time (Create a Day Trading Routine to Avoid Mistakes).
It's recommended that all new day traders trade only one thing. Whether it is the EUR/USD in the forex market, MacDonald's (MCD) shares in the stock market, the S&P E-Minis (ES) in the futures market, or any other asset in a given market, only focus on one.
This way you have less information to deal with.
When day trading, don't get bogged down by looking through too much information. Ignore financials and fundamentals; just focus on the chart for today. Only monitor price movements from the pre-market onward. There is no need to check daily charts or weekly charts.
Your tick or one-minute charts should provide all the data you need to trade in a timely manner. Looking at all sorts of other information will only distract you. For more on this topic, see What Time Frames to Watch While Day Trading.
How to Day Trade
Day trading is as complicated or as simple as you want to make it. Simple is better. To be a good day trader you don't need to know what every technical indicator does or it how works. You don't need to know tons of strategies or techniques for analyzing the market (see More Analysis Won't Make You a Better Trader). To be a good trade you need to only know ONE trade setup.
A trade setup is when a strategy produces a trade signal, and conditions warrant the trade being taken.
When starting out, save your time. Don't try to learn everything about day trading and the markets. Instead, learn one strategy, and learn it very well. Here is a simple day trading strategy: Day Trade Trending Strategy.
Many day traders who have traded successfully for years only use one strategy. When your strategy provides a trade setup, trade it. No trade setup, no trades.
Practice one strategy over and over again; it builds consistency.
How to Build Consistency
Practice doesn't make perfect.
Perfect practice makes nearly perfect. There is no shortcut--if you want to be good at something you have to practice it...a lot! As discussed above, this means looking for trade setups using one strategy in a demo account over and over again until you produce a profit from it, each month for several months (see How to Effectively Practice Day Trading in a Demo Account).
That's the type of practice it takes to get consistently profitable. Profitable trading is like a major league sport: very few athletes make it, but the ones that do dedicate every day to getting better. Unless you spend at least a couple hours a day practicing--for about five months to a year (varies by trader)--day trading consistency will likely allude you.
Practice your method perfectly to gain consistency. There is no shortcut.
Long-Term Day Trading Success
You practice a strategy, trying to implement it perfectly for many months, in order to reach a profitable state. Staying there requires the same discipline and focus. It never ends. Continue to execute that strategy as perfectly as you can, ignoring distractions, and avoiding the impulse to skip valid trade setups or take trade setups which aren't a part of your strategy.
Being an expert day trader, or even a consistent day trader, is a process, not a destination. Continued success requires that you come to the market every day with the same skills and processes that made you profitable in the first place.
Long-term success is created one trade at a time, by doing what needs to be done, and what has been practiced, on every single trade, every single day. Expect that it will take at least six months to a year in order to be consistent enough to string together several winning months in a row. For many new day traders, it will take longer than this.
First, limit what you focus on. You don't need CNBC or subscriptions to news feeds/trading signals. What you need is on your chart. Start with one asset and just trading on time frame--a tick or one-minute chart (see which hours to day trade). Then, practice one strategy over and over again, until you are profitable with it for several months in a row. To become consistent and successful over the long-term, continue to do on every single trade what created your success in the first place.
It sounds simple, but we can all think of examples--personal or otherwise--where we found success but got cocky, or stopped doing what was working, and that success slipped away. Don't let that happen with your day trading. Dedicate yourself to practice, and implementing what you practice on every single trade.
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