Day trading is an excellent way to make money online. Today, there are millions of traders from around the world. However, an important fact about trading is that it is a relatively difficult process in which most people fail.
Indeed, most brokers state that more than 80% of their customers lose money in a short while. At Day Trade the World (DTTW), we have also seen many traders lose money or underperform the market.
In this article, we will look at several tips that will help you instantly improve your trading.
Most people who lose money in the financial market are often beginners who have limited knowledge on the market. Therefore, for these traders, the most important tip to help them become better traders is to take the long journey of learning.
In this, you should spend a lot of time learning more about the market, the different asset classes, and how they work.
Fortunately, there are many resources that will help you improve your learning curve. For example, there are thousands of books on platforms like Amazon and Barnes & Noble. You can also download free books on the internet. Similarly, there are free YouTube videos that show more details about trading. You can also enrol in one of the many trading courses that are offered online.
Learning will instantly help you improve your trading in several ways. For example, it will introduce you to the financial market and how it works. It will also teach you more about the different asset classes and introduce you to specific details about the market.
Most importantly, as you learn, you will open up your mind to new ideas and concepts. For example, you will learn about concepts like level 2, harmonic patterns, and other chart analysis methods. It will also help you in developing your trading strategy.
» Related: 20 (and more) Day Trading Tips
The biggest component of trading is the actual analysis and trading. At the same time, a smaller but equally important aspect is about emotions and your psychological wellbeing.
Your emotions are so important in that they can make or break your trading. At times, these emotions can lead to substantial losses and even physical harm. We have heard stories of people who have moved into depression or even committed suicide because of having emotional imbalance during trading.
There are several emotional things that might affect your trading. For example, there is a concept known as revenge trading. This is where you attempt to recover your money after you have made a big loss. At times, revenge trading can lead to substantial losses.
Too much stress or excitement
Another psychological hurdle to deal with is uncontrollable stress when you make a big loss. You can handle this by learning more about the risk and reward ratio in the market.
You should also handle the situation of over-excitement after you make a big win. While it is okay to be happy, you should do your best to balance this excitement because it could affect your trading.
When you handle these psychological hurdles, you will be at a good position to improve your trading. We have seen people who have become more profitable simply by changing their psychology.
» Related: 3 Common (& Costly) Psychological Trading Mistakes
The next thing that will help you become a better trader is about trade analysis. There are several strategies to analyze trades. Some traders use approaches like fundamental analysis, where they focus on the underlying data. Other traders use tools like level-2 trading, which is also known as reading the tape.
Other traders use strategies like technical analysis, which involves using indicators like moving averages, Relative Strength Index (RSI), and MACD to make decisions.
At the same time, there are those who focus on combining all analysis methods like price action, technical analysis, and fundamental analysis to determine entry and exit positions.
Therefore, you should take time to identify the type of trader that you are. You should also spend some time to identify the strategy that has been significantly profitable for you. Finally, you should work towards optimizing it. For example, if you believe that harmonic patterns are your thing, you should work towards perfecting it.
Remember, you don’t need to be the jack of all trades in trading. You just need to identify one pattern that works and then become the best at it.
A trading journal is a document where your journalize your trading. It is a document where you put down all your trades and explain what is going on. For example, if you open a trade to buy Microsoft, you should note down all details of the trades. This includes details like the entry and exit prices and the motivation behind the trades.
Adding all these details in a journal might not make sense in the short term. However, creating that habit will pay off greatly in the long term.
There are several reasons for this. First, a trading journal will make you become more disciplined as a trader. And discipline is key when you are trading in the market. Second, a journal will help you identify your past mistakes and avoid them in the future. Third, writing down these entries will make you more productive.
Often it's the details, even the small ones, that make the difference. In trading there are so many variables that can lead to a winning or losing trade. Paying attention to these tips listed above, however, can make you a better trader and immediately give a boost to your performance.
External useful Resources
- Three Steps That Will Greatly Improve Your Day Trading - The Balance