Qualifications of a day trader
Most of you have probably heard about it, or maybe even thought about being it yourself: a full time day trader. Making a lot of money from home, spending hours a day behind your PC monitors and with just a few mouse clicks you send your orders and place your trades. There is no limit to what you can earn, as long as you’re just a little smarter than the mass of investors in the stock market. Being financially independent. Going on vacation whenever you want, not having to worry about money.
So far the dream, but how much of it is true or can become true? The answer is that all of the above is true for some people, and that, for anyone who is serious about it, can become reality. But there are also many wannabe traders who lose money in the stock market. And they make up the majority of traders. So being a successful day trader is not as easy as it seems.
What then is needed to succeed in day trading? The answer to this question is not so obvious, there are however a number of conditions which must be met if you want to be successful as a (day)trader. We have listed them below.
If you want to begin with day trading, you should prepare for a road full of pretty tense moments, but also a road with many possible setbacks. In particular, these setbacks (losing trades) weigh heavily on the psychological minds of traders. Both experienced day traders and beginners are affected by this. Every trader has already experienced this or will experience it and in order to succeed as a day trader, you must learn to cope with it. For this you will need quite some perseverance. It will help you to learn from your mistakes and become a better trader. And this takes us directly to the next paragraph.
Learning from your mistakes is crucial in order to be successful as a trader. There is no trader in the world who only makes profitable trades. You don’t have to be faultlessly, as long as your profits are bigger than your losses you are making money. The secret of a good trader is to learn from the misjudgement or wrong analysis he made on unprofitable trades. The only way to become a better trader is to learn form you own mistakes. Another important factor is to be able to place your own success in perspective. The temptation to overconfidence is great when one is successful. We tend to dedicate the success entirely to ourselves and praise ourselves for our “trading skills”. However, then the reality will hit us back as the market suddenly changes and our formerly so successful trading strategy no longer seems to work.
One of the most important things that you as a day trader will need to learn is to close unprofitable positions in time, before your losses become too large. Many inexperienced traders often hold a losing position, hoping that the trade will still turn into their favour. Usually this does not happen and their losses only increase. It is therefore crucial to work with tight stop losses. This means that you determine in advance what the maximum loss is you are willing to accept for this position and that you insert a closing order at that price level. Once the price hits this level, your position will be closed.
Choose a good broker
If you want to start day trading, the first thing you should do is find a good broker. A good broker is very important as it will be trading portal that lets you enter the market. The trading platform should be clear and easy to use. You must be able to act quickly with it, so that a trade can be placed within seconds.
When choosing a broker you should also examine what you can actually trade: stocks, indices, commodities, Forex, etc. Some brokers provide more opportunities than others so have a look at that as well.
Other factors you can compare among brokers include: transaction costs, spread, trading software, regulation, etc. More information about choosing a good broker you can read here.
The best broker for both professional and beginning CFD traders:
Plus500: A professional and reliable CFD broker. Plus500 provides a very clear and easy to use trading platform. Suitable for both beginners and advanced CFD traders. Read more about Plus500 on the Plus500 review page.