Want to make money day-trading? 11 tips

Generally it is observed that people enter day trading, looking at profits made by others, listening to rosy picture presented to them by friends and neighbours. They hardly try to analyse how they made money, and without any knowledge jump into day trading and end up with huge losses and a lot of frustration.

Remember, day trading is not a game of luck. It is not a game of ifs and buts, which people generally talk about. Remember, day trading is not an effortless proposition, it requires a lot of hard work, analysis, access to information (news), flow, conviction and more importantly certain qualities which are discussed below.

Qualities required to become a successful day trader

Clearly, day trading is not for everyone. Certain qualities will decide your success or failure as a day trader. Here is a list of qualities which we feel are essential to succeed as a day trader.

1. Flexibility

Flexibility and adaptability are perhaps the most important qualities a day trader should possess.

I have observed that people who are extremely rigid tend to perform poorly as day traders.

Such flexibility, however, must be maintained within the context of specific understandings, trading signals, and/or guidelines. A trader must be flexible not only to new ideas about the markets, but also to situations which develop in markets during the day. Hence, flexibility is an important quality which, unfortunately, cannot be taught.

2. Self control

Another important quality which successful day traders must either possess or develop is self control.

During each trading day, a trader comes across hundreds of trading opportunities; however a person cannot act on all of them as it is practically and economically not possible to enter all trades. Also, which of these opportunities will be profitable, is not known to the trader in advance. Hence it is, important that a day trader has sufficient degree of self control, so that s/he does not jump in all trades, trying to profit from everywhere.

A day trader must begin each day's trading with a general plan of action within which the day's events may be interpreted and the proper actions taken. The plan, however, must not be so restrictive as to blind the trader to other unexpected opportunities. In so doing, some of the worthless or losing opportunities will be eliminated ahead of time, and the trader will stay focused on those which seem to offer the best potential.

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3. Willingness to exit trades at the end of day

Seventy-five per cent of traders enter positions originally as day trades; however, if these trades show losses at the end of the day, they are inclined to hold them overnight or longer given their refusal to take the loss.

This happens mainly because of the fact that they are not willing to accept the fact that they have been proved wrong. They often give justification that the position will profit soon.

Holding a position overnight, particularly a losing position, is perhaps the single greatest offense that a day trader can commit.

Frequently, it is also the single most costly violation of day-trading rules. Still another important quality which the day trader must develop is the willingness to exit positions by the end of the day.

4. Accept responsibility

Taking responsibility for all your actions and all your trades at all times, without giving any reasons is one quality which is very important to succeed as a day trader.

A successful trader will never blame the market, the government, the companies or anyone else, and will take complete responsibility for her/his actions, and losses, if any resulting from them.

A day trader must always remember that market gives ample opportunities to them to make money. It is only the trader's fault if s/he does not recognise them.

However it is noted, that due to ego problems, many traders believe that they can never be wrong, so they tend to give excuses like fault in trading system, mistake of broker while placing orders, false rumour, listening to others' opinions, etc. Many of these excuses may be valid, but by accepting responsibility for all your trades, without making any excuse or without blaming anyone, you empower yourself to consistently improve your performance in the future.

5. Discipline

Discipline is one of the most important quality required to succeed as a day trader. A successful day trader always follows a disciplined approach. S/he never breaks discipline, i.e., s/he never breaks the rules of the game.

A successful day trader always obeys discipline, s/he closes the positions that don't work for her/him, irrespective of how big the loss may be. Similarly s/he exits a good profitable position, without thinking much about the profit it can give tomorrow, if held overnight.

Disciplines also refer to trade with your own funds and definitely not borrow funds under any circumstances, and also not overtrade.

Discipline also refers to giving your day trading positions sufficient time to work, either in your favour or against you, before exiting.

Above all, discipline is the ability to come back to the trading arena every day, regardless of whether you have won, lost, or broken even the day before.

6. Able to digest losses

To succeed as a day trader, one must learn to accept a loss; and digest it quickly. The day trader must be willing to accept what he or she has achieved by the end of each day without undue frustration and/or wishful thinking-win, lose, or draw. As human beings we always look back on what we have done, often with regrets, thinking that we should have done things differently. Always remember, each loss will teach you something important.

7. Daily analysis of results

Day traders should have a formal procedure for analysing their results at the end of each day in order that the maximum amount of learning can be extracted from each trade, whether that trade was a profit or a loss. This, of course, requires some degree of organisation and consistency. I urge you to begin keeping a diary if you are not already doing so. You'll be absolutely amazed how much you can learn by jotting down your comments at the end of each trading day. It only takes a few minutes, and the reward is literally hundreds of times the cost and effort you put in.

8. Confidence

The best traders are successful because they are able to maintain unshakeable confidence in themselves and in their decisions. This serene self-confidence creates a positive state of mind and the will to act.

When you are short of confidence, you tend to miss opportunities, reduce your gains and extend your losses. This is all happens due to emotion called fear.

When you are confident enough, you tend to stop second guessing and also stop worrying about the consequences.

Think of a confident role model, preferably a successful trader whom you look up to, and pretend to be that trader.

9. Concentration

Concentration is another important quality which the successful day trader must either possess or try to develop.

In day trading, so much information flies around you at all times. So many scrips rising, so many scrips fallings, various important announcements coming in, etc.

In such an environment, to succeed as a day trader,, you have to stay on top of it, be able to avoid distractions, and stay focused.

As far as possible, for day trading, your trading room should be free from any kind of noise and disturbance and should be as silent as possible. This helps you to concentrate in your trading.

10. Patience

Patience is yet another important quality required to succeed as a day trader. Day traders must be willing and able to tolerate a series of losses, as they patiently await a turn in their fortune. However, too much patience can act as a fatal flaw. The day trader who is too patient in hanging on to a losing position will be violating one of the cardinal rules of successful day trading, which is, of course, not to carry losing positions (or for that matter any positions) overnight. Losses must, in all cases, be taken as quickly and as expeditiously as possible.

The idea is, of course, to ride profits to their maximum while eliminating losses quickly.

11. Willingness to learn

You cannot learn trading in a day or even a few weeks, sometimes not even in months. Successful traders keep reading all the new research on technical analysis they can get their hands on. They also read a number of books every month about techniques, about trading psychology and about other successful traders and how they manage their accounts.