Preparation and discipline are key when it comes to being a better day trader. Follow these steps to start making smarter trades today.
When it comes to being a day trader, the more prepared you are, and the more discipline you practice, the more successful you’ll be. Preparation and discipline go hand in hand when you’re a day trader. Why is this? A trader that allows his emotions to influence his trades is not going to do well. Knowledge is power, so if you prepare first and stick to your strategies, you can go into the stock market and make knowledgeable trades.
Want to be a better day trader? Then you should follow this discipline and preparation cheat sheet.
Table of Contents
Mental Preparation
First things first- start your day off right. You don’t want to start your day trading when you’re groggy and not at your best mental state. Wake up in time to grab some coffee and get yourself settled before the stock market opens. Being in the right state of mind is vital when you’re about to begin making trades. If you’re having a particularly emotional day, don’t make trades. It’s better to take a day off rather than to make trades that you’ll regret later.
Create A Trade Plan
Making a spreadsheet or document to plan your trades daily is helpful to keep you organized and prepared. Create a category for “news/events and technical analysis/patterns.” Then another for “trade ideas.” Making another category to include random notes or thoughts you might have as during your trading session is nice to have to look back on later. Just make sure to date each day of notes to keep organized. It’s easier to remain calm during trades if you know what you’re doing and feel prepared.
Analyze The Market
Using the spreadsheet or document you just created, start analyzing the market and begin recording what you find. Using technical and fundamental analysis, start deciding which way you think that the market is going to go that day. Doing this will allow you to discover new trading opportunities and manage open positions. Scan over price charts and record on your prep sheet for any levels you intend to trade. Record the reason for placing trades, your estimated risk to reward ratio, and stop loss placement and profit target. Stay up-to-date on the news for each trade day and make notes on your daily prep sheet. Any news that could potentially affect your trades are things you should be recording. This may include geopolitical news, economic data releases, central bank meetings, as well as company news. Once you get the hang of this daily research, you should be able increase your analytic efficiency and you’ll know which stocks to focus on very quickly. At the end of each trade day, be sure to record your profit or loss. Write down any conclusions you have so that at a later time you can reference if you need to. You don’t really learn from experience, but from reflecting on experience.
Practice Discipline
Why is discipline so important when it comes to successful day trading? Discipline leads to confidence and keeps you from making risky moves. A lack of discipline is more often the cause of common trading mistakes such as making impulsive trade decisions, revenge-trading or over-trading, violating risk management rules, and executing trades prematurely. A trading plan is an excellent way to help keep you disciplined, so if you have one, you’re on the right track already. It will make impulsive trade mistakes less likely to happen. Strategies are also make for a disciplined day trader. Develop a methodology and stick with it, don’t change it from day to day- even if you have an unsuccessful trade day. The real battle is not with the stock market, but managing your own emotional impulses and human nature. Don’t let fear or greed get in the way of making smart trades. It’s also important to remember that sometimes the best action is no action; you don’t have to make trades every single day. If you have a lot of distractions going on in your life, take the day off. You’ll be glad that you did. Remember that everyone experiences losses in the stock market. Everyone. It’s impossible to win 100% of the time. It’s what you learn from these losses that makes the difference. Did you hold on to a stock too long? Did you make an impulsive trade? At the end of the day, reflect on your losses and see how you can avoid making those mistakes again in the future.
Keep Calm And Make Smart Trades
Day trading can be stressful. That’s why preparation and discipline are key when you want to trade successfully. If you take anything away from this, it should be to take notes, trust your strategies, and don’t be emotional. Know when to take a day off from trading to avoid mistakes. Being a day trader can be an uphill battle at times, but if you put in the time to research, and stay calm during trades, you will be much more successful. Fail to plan, and you plan to fail.