Published On: Sun, Jan 20th, 2013

Day trading tips

If you’ve ever traded the financial markets then you will be aware of how temperamental they can be.  If you haven’t then be warned, the majority of people make losses in the long term.

This article has been written to provide guidance to people that are new to trading and perhaps for traders that have hit a brick wall and are looking for some inspiration.

We plan to keep adding to this guide as time goes by.

Trade without emotion

Although for many, this is easier said than done, a key component of a successful trader in the ability to remain emotionally detached from their trading decisions.  It is important to keep mentally distanced although conscious of your emotions in order to control them.

It can take time to develop a ‘traders psyche’ but ultimately, without such a mind-set, you are likely to fail in making a living from trading the financial markets.

The most important emotion to distance yourself from is negativity and of course this is true in all walks of life.  In the context of trading though, negative feelings can stifle what otherwise could be a profitable days work.  Remember, not all trades will work out the way you planned they would and losses are to be expected.  Put a positive slant on any negative outcome and treat it as a valuable learning experience that will assist you in making future decisions.

Conversely, don’t get over confident when things go your way as profits can be wiped out in the blink of an eye.

Develop a system and follow it religiously

Any serious trader needs to consider the system they are going to follow, day in, day out.  They should not be driven by whether their account is in profit or loss but by whether their activity fits the system they have developed.

A number of things need to be thoroughly thought through when designing such a system:

–          Decide upon the markets you are going to trade and the timeframe you will be active in it for.

–          Set entry rules.  Are you going to be entering a market as it is heading in a particular direction (trend following) or are you going to swing trade and enter when prices are being traded at an extreme?  Decide on which of these rules you are going to commit to prior to entering into a position.

–          Determine exit rules.  Are you going to close out your position once a particular sum of profit has been realised?  Are you hoping to achieve a set percentage gain?  Perhaps there is a particular timeframe that you want to keep a position open for?  Predetermine your rule for exiting a position and again, stick to it.

–          Evaluate your system.  Have you made a gain or incurred a loss?  What is the average profit or loss from each trade?  How many trades are you placing each month?  These are the sorts of questions you need to be asking yourself and the answers will help you lead on to the next point

–          Improve.  By analysing the information your system has provided over a set period, it will help you tweak and improve it.  Systems aren’t perfected overnight but are intended to become more efficient as weeks and months go by.

Educate yourself

With all else being equal, a trader that is highly schooled on trading analysis, psychology and other relevant topics, is likely to outperform someone who has steered away from theory.  It is highly advisable to sign up for every resource you can and research reputable day trading courses that suit your requirements.

There are numerous resources that can be used to advance your knowledge and much of the information can be found for free.  Some great, free resources include:

Forums such as

YouTube Educational Videos.

Broker education.  Note:  Spread betting company, ETX Capital offers some great third party education for free.  All you need to do is sign for a live account to be eligible.

Reputable analysts and investor’s blogs. 

Combine Technical and Fundamental analysis

Although there are many people that specialise in one of the two schools of analysis, a trader with sound knowledge on technical and fundamental aspects of trading will have a serious edge.  In a business that is all about creating an edge, you would be highly advised to combine both forms of analysis when deciding on trades.

Be Patient

Patience is part and parcel of success in this business.  Markets take time to move and profits normally take time to be achieved.  Don’t be impatient and wait for the perfect time to enter a market, even if it takes hours, days or even weeks for that moment to appear.

About the Author

- Marcus Holland has been trading the financial markets since 2007 with a particular focus on soft commodities. He graduated in 2004 from the University of Plymouth with a BA (Hons) in Business and Finance.