It means to remain neutral and not be affected by your trading decisions. I have met day traders who were emotionally miserable for the rest of the day, losing $100 or less. Then they realized that $1000 would make them “on top”. They are trading neutral.
If you are like this, then you will trade based on fear and greed. For example, if you are down $100, you don’t want a loss because you know it will cause emotional pain. Although you should make profits, if you are up $1000, you might want to get more. Sometimes you may take profits far too early, fearing that the situation will change. Professionals don’t let the small fluctuations in their account affect them. One week’s results are not important, nor is the monthly. It is just a brief moment in their career. The day-today fluctuations don’t really matter. Beginers are likely to experience emotions. If they have a negative impact on your trading decisions, I strongly suggest that you return to paper trades in order to gain the confidence necessary to keep those oscillations from affecting you.
This means you should be neutral and see price movements for what they are. It is possible that you all have seen the situation in which a trade is losing you and now you are looking for reasons to hold onto it. This can lead people to place stops and potentially lose a lot. Before you open a trade, make sure your entry and exit criteria are clear. You shouldn’t change your strategies while you are trading. There is always a reason your position will move up or downward, but you don’t actually see the price change. Your reaction is changing to prediction. Day traders should not try to predict future price movements. As traders, we must be able to predict the price movement, and not what we believe it should be. You should leave the prediction up to investors. I have seen traders often take positions in stocks they do not understand fundamentally. They also mix investing and trading. This is also very dangerous. This is dangerous too. You can think of Enron.
Yes, there was a point during Enron’s sell-off when trades might have been justified. Even I owned Enron during a very brief recovery from around $8.5 to 10 dollars. Problem is that if the assumption that the company’s price is low and it will recover is what you have, then you will be more inclined than ever to hold it or add to it when it drops. The more strongly you hold a stock, it will be harder to make decisions based upon the actual price movement. It is strongly recommended that you have a separate account for fundamentally-based trades. Day trading accounts can give you too many leverage, which makes it tempting to take excessive risks. While I do not advocate a lack of expectations, it is important to know what your potential trades might look like. However, if those expectations prove to be incorrect, then we need to accept this and act according to the actual events.
In order to make trades, it is important not to be afraid or insecure about your trading decisions. You’ll often let great opportunities pass you by or wait for confirmation that the stock will go your way. If you wait too long, you may end up entering trades too late. Then you might end up chasing stocks and often get in at the tail end of the movement. Fear of losing your money makes it difficult to take loss. Too much fear will lead you to either not taking any losses or causing large draw downs. Be confident that you can make great trading decisions. You’ll be able to stay patient because you know there will be opportunities. If traders lack confidence, they tend to seek out new trading strategies whenever things go wrong. They’re not able to concentrate on one strategy and master them. Even if a trader is an expert, confidence can slip from time to another. For help, go back to paper trades or small share trading in order to get your foot back on the right track.
Day trading is risky if you do not have any other income. Fearful money does not win. I have yet seen a trader make enough money to sustain a trading account of 5K without any additional income.
Many traders try to implement too much strategy at once. They believe that they have to make a lot of money every day. Most of the most successful traders I know have only a handful strategies that they are successful with. Sometimes, it is only one. Finding a strategy that you feel comfortable with is the best way to learn it. This won’t happen overnight. This is why you should look at (and test) many different strategies until one strategy works for you. It is important to remember that no strategy will work in all markets. It is okay to sit back once in awhile. There is no need to make money every day. Trade only when you feel the odds are in favor of your trades and keep playing the game. Once you have created a strategy that is “bottom-line”, you can start to implement other strategies.
You must be patient during the learning process. It is okay to trade on paper for some time. You will make mistakes. It will take time to get comfortable trading. It is important to record your mistakes so you can learn from them. You should only trade live if you are absolutely compelled to. Please start with a small amount of shares. A small share of shares is not enough to make mistakes. You can lose your whole buying power if you don’t use all of your buying power. I have yet see a trader (including mine) who hasn’t lost a stop at least once. !
Important is patience to wait for trading opportunities. There are not always successful strategies. You may need to wait for a good trade to happen. It is also possible to lose a lot of trades. An excellent trader won’t worry about this and will move on to something else. You shouldn’t be trying to get back your losses by sitting in front of a computer. Set your maximum losses per week, day, and overall. If your maximum losses exceed the limit, you should immediately stop trading. Don’t forget, there Certus Trading Reviews are always new opportunities every day as long as your losses are not too high.
A good day trader will not take on more than 2% risk in a single trade. This means that, if he must take a stop, the amount he is willing to lose will not exceed 2% of his capital. The maximum amount you can lose is 2%. Avoid taking any risk. This is important because even though you may be right 9 out of 10 times, it is possible to lose 10 consecutive times. Sometimes, this could happen to you. Only those who are willing to put up little money will be able survive such a drawdown.
Trading with confidence has been the most important step to success in day trading . Most successful traders I know use only a few strategies. The key to their success was their confidence in their trading strategy, the ability to stay neutral and the ability to execute trades based on what they see.