If you want to learn how to start day trading, you have to create a day trading plan. We encourage our new traders to start working on a SMART plan to create specific goals to strive for.
SMART plans call for new traders to create goals that are: Specific, Measurable, Attractive, Realistic, and can be set to a specific Timetable. If your goal is to make a living as a day trader in the coming months and years, there are some essential steps to take as you learn how to start day trading.
All new traders have to be disciplined and must have a process. In addition to having a SMART plan in place, new traders should draw up a formal day trading plan. While trading, traders need to have a simple checklist in front of them and should only scan the stocks on their watch list. To eliminate as many variables as possible, traders should keep their stock universe small and have a share-sizing chart. Process wise traders need to keep a trading journal, meet regularly with their trading coach, and pay attention to the rules of achievement chart that brokers use to track progress.
New traders should measure progress not by their profits and losses, but by how well they followed the rules. To make it easier to follow the rules and not give into the temptation for larger profits, guidelines teaches its traders to start small. These small trades make it easier for traders to diligently follow their day trading plan. When trading, it’s best to keep a trading log and mark up the day’s charts. All traders should study their logs and charts, keeping track of what they did right or wrong and looking for areas to improve. New traders should identify one area where they excel and work that into their day trading plan.
Through taking these measures to have a process and a day trading plan, Wall Street Traders can avoid many of the pitfalls that hurt new traders. These “trading demons” play into natural tendencies to be greedy and let emotion influence decisions. Some “trading demons” to look out for include:
- Trading counter trend, or without consideration for what’s trending.
- Trading without pattern or set-up. New traders need to be disciplined and stick to what the charts are telling them.
- Taking late entries or chasing triggers. When learning how to start day trading, it’s incredibly important to take the emotion out of trading.
- Trading without a stop or without keeping stops. Stops limit losses and lock in profits.
- Not having targets or not taking profits while they are there. Don’t be greedy, stick to the process.
- Overtrading or revenge trading.
- Averaging down on a losing stock. Just let it go!
- Turn losing trades into higher time frame holds. Stick to the day trading plan!
For more information on how to create an effective day trading plan and learn more about CFD trading, please visit ETFinance.eu