Every person that is considering trading in the stock market considers day trading. It is inherent to the game of investing to want to play with the “Big Boys” by day trading. It can be an expensive game to learn, and for some people, it will forever be a losing game.
Part of the problem with day trading, is getting information soon enough to make a decision. Another problem, is trying to scalp small percentage points like you see the analysts on TV doing. If you have a big enough bank account, and have access to really fast equipment, you might be able to pull this one off. My recommendation, leave it for the big boys who pay the big bucks to have a seat on the board of trade, as a small investor, you are never going to beat them at their game.
However, the biggest single problem facing a novice day trader is simply pulling the trigger. Most novice traders suffer from paralysis of analysis, they are trying to find the perfect time to get in or get out. There is no perfect time, you just have to make the best you can with what you got.
One of the saddest things that can happen, is for a trader to know deep in his heart that a trade has gone bad, but doesn’t want to take the loss. He will sit there, holding a losing trade, knowing he should sell, but he just can’t force himself to take the loss. Until he sells, it is just a paper loss, not a real loss, and the trade may turn around. When he sells, it becomes a permanent, real loss. However, while he is hesitating, his position is losing ground and when trading options, they can end up completely worthless.
This is where having a good mechanical trading system will come in handy; it helps to eliminate the emotion from trading. A good mechanical system will have a set point to enter the trade, and a set point to exit the trade. As long as the trader remembers, and uses, the rules of his system, the odds of winning on a trade greatly increase. More importantly, the odds of having a devastating loss are greatly decreased.
To find what trading system works best for you, use paper trading until you completely understand what the rules are, where you should enter the trade, where you should exit the trade. Learn where to place the trailing stops to minimize loses. Don’t be afraid that the time spent paper trading is time lost in the market. One thing you can be assured of, there will always be another trade coming along.
John Marston is a self taught trader who has traded online for over 15 years from his home in California. You can go to his website at http://www.Trade-The-Stockmarket.com which has a wealth of information about various trading strategies. You can also read his Blog which describes some of his personal trading strategies.