If you’re considering becoming a day trader, or recently started your journey, here are three initial day trading goals to strive for. Most traders start with “money goals” such as I want to make $100 per day, $10,000 per month, or whatever the particular number is for that person. Money comes later though. Money goals won’t help you–and will likely hinder you–when you’re first starting out. Instead your goals should be centered around learning and self-discipline. Before you get into this article also you should need that analysis and trading is different. You should required some market knowledge also with only technical analysis you will be not successful in trading.
Basic Order and Market Knowledge
- Your first goal is to acquire some basic knowledge. There’s lots of information out there, so focus on learning a few concrete things related to the market you wish to trade.
- Learn how markets move based on the Bid and Ask price. Understanding a Level II screen will also aid in this regard. See The Bid Ask Spread Explained for more on these topics.
- Learn about the market hours of your exchange, and what major economic press releases affect that market.
- Understand the order types available in your market, and primarily how to place an entry, target and stop loss order.
- Having the proper position is a key element to trading success. Learn to determine proper position size. Here’s how to do it for stocks, forex and futures.
- Introduce yourself to how trading statistics work. A 50% win-rate on trades doesn’t mean your trades will necessarily be win, loss, win, loss, rather it could be loss, loss, loss, win, win, win. New traders may become disillusioned when they hit a losing streak, but losing streaks are part of trading and over many trades you can still be very profitable even with several losing trades in a row.
Your goal is to learn these basics. In the next step you’ll start to develop some strategies. This is where you can dig a bit deeper into technical analysis and strategies.
Creating a Trading Plan
With a basic understanding of your market, start creating your trading plan. Your trading plan details exactly how you’ll trade, and under what conditions. It has four main categories: market specifications, money management, entry rules and exit rules. For more on creating a trading plan see: Create A Trading Plan in Four Steps.
It is in this stage you’ll research areas that interest you. For instance if you like just trading off your charts, research price action strategies. If you saw a video on the MACD indicator, or some other technical indicator and you liked how it functioned as a trading tool, then research and experiment with that.
Focus on only one or two tactics. There’s a misconception that in order to be a trader you need to know every chart pattern and technical indicator. In the beginning too much information will work against you; it’ll make you question yourself too much. A bit of questioning may be healthy but if it causes you to freeze that’s bad…and there’s always a reason not to take a trade if you look hard enough. Focus on one or two tactics, and then create your four trading plan around it. Instead of trying to learn everything and getting lost in a sea of information, only focus on concept, and learn it well. One strategy is all you need to start trading effectively.
Following a Trading Plan
The final step is the hardest. There are loads of great trading plans and strategies out there, tested over thousands of trades and years worth of real-time trading. As mentioned above though, no strategy will win every time. That means even through the rough patches stick to your trading plan.
This is a major challenge. If something has proven itself (this means thoroughly testing and practicing with a strategy) then it should be easy to stick to the plan and achieve those proven results, right? Nope. Win or lose there’s a tendency to start trading outside of the plan.
Traders on a “hot streak” tend to get cocky and take on more trades and risk than they should. This leads to a fall back to reality. Traders on a “cold streak” often think their plan is faulty, and toss it out in favor of some new strategy they can purchase for $19.99 online.
Follow the plan. That’s your goal. Take it one trade at a time. This is all done in a demo account until you’ve booked at least two months of profitability with the trading plan. Only then switch to live trading.
When you first start out, the first two steps will like take a couple months. That’s okay. Consider it part of your education; in any job there’s a learning curve. Once you have a trading plan, stick to it until it proves itself faulty. The plan is constructed and tested in a demo trading account. Make at least 100 trades before considering a strategy a success or failure. After 100 trades take a look at how the strategy has performed (and your implementation of it). If some adjustments are required, make the adjustments. Then, make another 100 trades with the adjusted strategy.
The process continues until you have something that works, and then you begin trading it in the live market. No matter how long you trade though, the third goal always remains stick to your plan.
Ashish is a Founder of processtrends.com He loves to do SEO and Day Trading. This both are his full time passion or professions.