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Subject0:
What Day Trading is and what is its more important element for success
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Date: 29 May 2007
Time: 23:12:11 +1100
Remote Name: 91.124.254.20
What Day Trading is and what is its more important element for success
This is a brief introduction to Day Trading. What it is, what it is not, and
what is critical to become successful at it.
Although the word has a negative meaning, Day Trading IS speculation indeed. In
Day Trading, one buys (sells) securities and closes their position within hours,
that is, before the day closes - thus the name of Day Trading. While Day Trading
is speculation, that does not mean that it is useless. To the contrary, it
contributes to more "liquid" markets, which means it facilitates transactions.
Day Traders base their decisions on statistics and mathematical models (this is
called "Technical Analysis"). Nowadays, orders are made through the internet.
Processing is sometimes 100% computerized/automated (e.g. NASDAQ). Everybody can
trade from the comfort of their home and make really good money. This is why
there is such a buzz about it.
You likely knew that. Now let's look deeper into what Day Trading is not, what
else it is and what makes the difference between the good traders and the
others.
What Day Trading is not ...
Day Trading is NOT Investing, per se. Like I state above, it is speculation.
Useful speculation.
Day Trading is NOT an easy way to make money - it requires hard work and
commitment - ... unless you trade with a good Robot (more on that in another
article).
There is NO such thing as (bad) luck in Day Trading.
Day Trading is NOT about Ego. Always remain humble. No bragging when you
succeed: respect the profession and respect other traders.
Day Trading has NOTHING to do with emotions. Keep your emotions in check when
you day trade. If you don't, take a break.
What Day Trading is ...
Day Trading IS about flowing with the market. You never control the market. But
if you respect some elementary principles, you find out that the market is your
ally.
Day Trading MAY be a way to get rich but only for a minority of traders. Most
traders hardly break even as transaction fees and costs remain high. Therefore,
keep in mind that this IS a risky business. Unfortunately, most people forget
some very basic principles that are essential to suceeding. I have known some
very good, fundamentally sound traders. That is, technically sound traders.
Unfortunately, their mental approach was imperfect and they failed eventually.
Learning the basics is easy. Defining a good system is not too difficult. Next,
determining Money Management rules comes naturally. Sticking to the rules that
you have carefully designed, under any circumstances, IS the most difficult part
of Day Trading.
Succeeding
Therefore, keys to success are (beside a reasonably sound system such as the one
I am exposing here): Psychology and thoroughly applied Money Management. That
may seem obvious but you will understand it better along the way as you start
your Day Trading career. By the way, during your journey to Day Trading success,
you will also understand a lot about ... yourself. You will realize that
emotions run your life - something you cannot afford while Day Trading.
If there was one aspect of Day Trading that I would like you to remember, it
would be that two things will be critical to your success - more so than any
system will ever be. Psychology and Money Management. If you respect some key
rules (that will suit you because you will have determined them) at all times,
you will likely succeed.
People who have no significant experience cannot fully realize how important the
mental approach is to Day Trading. Money Management is critical as well; but it
is strategy. It is part of the system. On the other hand, your mental readiness
will be 90% of your success because it has to be tested in the heat of the
moment as opposed to being planned. The mental approach of Day Trading is like
the foundation of a house. Should it ever collapse, the whole edifice will
collapse. On the other hand, if your mental approach is solid, you will build
success with relative ease.Mark Kottaras has been a successful trader for more
than two decades. He now specializes in Day Trading and Forex Trading, with a
special interest in automated trading algorithms. He is testing and reviewing
automated Forex trading systems on his website - http://forexpipsandtips.com/ -
and he explains his Day Trading system on his blog - http://forexpipsandtips.blogspot.com/.
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