Day trading can be a thrilling way to make money. But it's more challening than most beginners think. Here are some day trading tips that can help the new trader as well as the more advanced trader to achieve your goals faster.
First: Avoid over trading. Most of the time the market is a random walk - meaning that it is moving up and down without any predictable pattern. This is caused by retail traders taking small positions in the market, and often exiting quickly.
These retail traders don't affect the long-term moves of the market. It's the pros, with their large volume and their willingness to hold positions longer, who create sustainable moves in the market that can result in significant profits.
Many traders are lured to day trading because of the energy of the business and the potential for big profits. This mindset is not helpful. The pros keep their powder dry for long periods of time waiting for a high-probability situation to happen. They are much less active than beginners think.
Second: The common axiom "The trend is your friend" is a half-truth.
It's more accurate to say that the trend is a fair weather friend!
It's true that the trend is your friend early on. But trends get exhausted and end. It's more accurate to say: "The trend is your friend, until the end."
There are 2 times to trade when you can put stats on your side:
At the very beginning of a trend.
When a trend is getting "tired."
Taking positions at these 2 times put the stats of the bell curve on your side.
Third: Participate in chat rooms for day trading tips and do the opposite!
I've participated in many chat rooms over the years, and have received a tremendous benefit from them. But the benefit did not come from listening to the teacher. It came from watching the comments of the participants as they shared what they were doing at any given time in the market.
The vast majority of the time they were dead wrong in their approach.
They represent the collective voice of the unprofitable masses. It's uncanny how all the amateurs think alike when it comes to analyzing the markets. If you follow them in the chat rooms long enough you'll pick up on the patterns of the things they do wrong over and over. Then you'll learn to do the opposite and win.
As an example, one of the most common problems amateur traders have, is resisting the urge to fight the trend. You'll often hear comments such as: "The market can't go any higher than this." "This market just has to turn around at this point." "The market is definitely way over-extended now."
It's uncanny how the retail traders as a group, seem to be determined to find tops and bottoms. For some reason they have a hard time trading with the trend and seem obsessed with trading against it. Of course this can spell big money for you. Once you know what the amateurs are doing, you can make money be trading against them.
Day trading can be very profitable, but to succeed you must not align yourself with the masses. You must avoid the herd instinct that drives the losers. Use these 3 day trading tips to help you on your journey toward being one of the minority who succeeds.
About the Author:
Dr. Barry Burns is the president of Top Dog Trading, writes a day trading blog and offers a free 5-day video course which offers day trading tips. He has spoken at DayTradersUSA, "Elite Masters of Trading," and Traders Expos.
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