If you are looking to get into the incredibly fun and rewarding profession of day trading, there are a few things you should know before you begin.
First of all, day trading is not for the weak stomach. Once you begin trading on the live markets (after you test your skills with dummy accounts for a year or two), you should realize that the best traders have absolutely no emotion about separating you from your money. You are not fighting the market or responding the information that you see on the TV or from other media sources; you are locked in a face-to-face battle with the trader on the other side of the trade.
You must also understand that your purpose as a new day trading professional is not to create profits for yourself; it is to act as a temporary market maker for a niche market in which you have better pricing information than the majority of the other participants in that market. The purpose of successful day trading is to more quickly facilitate the movement of securities from buyer to seller. You are basically taking the job of the market makers, which consists of the best traders running the best day trading software in the world. This is not an easy job to take, and they will not give it up easily.
In order to be successful in the world of day trading, you must definitely invest in the best trading software that you can get your hands on. You need a trading software package that has an execution time that rivals the market makers on Wall Street and you also need sources of information that you can trust in always.
You will find that the majority of the information that you received as a day trader is not helpful to you, although it may actually be true in fact. You will slowly but surely whittle down your information sources to a trusted few, and your strategy will become more and more focused on the industries in which you have a competitive advantage. This is what is necessary to become a successful day trader.
Guide to Forex Day Trading
Never before has the Forex day trading market being so attached to the political landscape of the world. With the euro zone currency crisis and the Greek bailout still hanging over the heads of world economists and political leaders, business across the world is at a virtual standstill. No one knows what the next move of the euro zone will be or if the unstable nation of Greece will bring down the entire world economy into a second recession following the one that was caused by the United States housing bubble.
However, there is still a way to profit from all of this madness, and it is in the Forex day trading market.
For the savvy investor, the volatility between currencies of the world is an opportunity to create profitability for themselves. Highly volatile currencies with lots of arbitrage to be had is not scary for a Forex day trading professional; rather, it is like taking candy from a virtual baby. Such a wide opportunity for the savvy Forex day trading professional only comes during times of increased volatility around the world, and as the politics of the world are trying to steer the economies of the world towards some kind of stability, this opportunity will likely not come again for a long time.
The secret to investing successfully in this Forex day trading market is not more information, but less information. Along with all of the relevant information that may be completely true will be a lot of irrelevant information that does not pertain to your individual Forex day trading portfolio. That information should be quickly shunned and ignored.
The biggest mistake that many intermediate and novice Forex traders make is to act on every piece of information that they receive. Success in Forex comes from limiting yourself to currencies in which you have a competitive advantage of knowledge. You will then set up an investment portfolio that mirrors this competitive advantage. You will only act on information that directly concerns your portfolio, leaving the other “hot tips” for people who have competitive advantages with those areas of the world.
Day Trading Strategies
In order to be successful as a day trader, your day trading strategies must be geared toward your strengths as a trader. You must first figure out exactly what advantage is that you have in the marketplace that can be leveraged to obtain the most profit for your day trading business. You will then be able to modify and tweak your day trading strategies to complement this philosophy.
No matter what a person’s day trading strategies are, the first reason that most people are not successful as a day trader is because they do not hone their skills in a niche market. The biggest mistake that you can make as a novice or intermediate day trader is to try to connect your day trading strategies with the latest “hot tip.” Even when these tips are completely truthful in nature, there is an element of execution that almost ensures that any tip that you have seen, other people have already seen many times. All of the juice in that trade has probably been sucked up by people who have a split-second faster execution then you.
Instead of being a follower, dictate your day trading strategies and philosophies before you go into the marketplace and let your results follow from them. Sticking to a philosophy and only the industries in which you have an educational or strategic advantage is the number one way to succeed in the day trading market. After you have mastered this discipline, you will be ready to make even more niche oriented tweaks to your day trading strategies. At this point is where the real money starts rolling in on a consistent basis.
Once you have chosen a niche and a strategy that fits you as a trader, you will be able to more easily discern which information is accurate and good to trade on. You will naturally narrow down your information sources and your strategies will become much more tightly wound around a few formulas and patterns that have shown themselves to be consistently profitable for your day trading business. This is exactly the effect that you want.