Description

My basic trading philosophy can be summed up by one simple quote:

"Trade the ticker, not the company" - Nate Michaud


Monday, January 27, 2014

Question: "Is Daytrading Right for Me?"

I truly do believe that daytrading is a superior way to play the market as opposed to a long-term investment strategy. Perhaps some of that thought comes from the fact that it's a better fit for my personality. However, in my opinion the potential to exponentially grow your account simply does not exist with a long-term investment strategy. That being said, daytrading can also be extremely risky and puts your capital at far greater risk than a long-term strategy. I believe that I've excelled as a trader because of a few key factors. Before deciding to pursue the path of a daytrader, you should honestly reflect upon your own situation and decide if this is right for you. There are two main factors that I think are necessary to give you a chance at succeeding:
  • Ability to Stay Disciplined
I'll be the first to admit that I still have lapses in this area, and when I do it costs me money. However, I have overall been able to stay disciplined and stick to my set of trading rules. The ability to cut losses quickly, avoid over-trading, and not trade off of emotions (such as making a trade because you are "bored," or trying to make back losses) are absolutely essential to succeed in this field. Be honest with yourself, are you a disciplined person? Much like a poker player will go on "Tilt" after a bad beat, can you avoid getting emotional and reckless after taking a loss? This is a KEY area, so do not take it lightly.
  • No Need for "Quick Money"
Daytrading is not easy, especially when you're first getting started. Everyone has a different learning curve, and I can only speak to my own experience; but when I was getting started, I took three months to watch video lessons before diving into the market. Despite this lengthy preparation, I found that once I was trading live it was a totally different game. Trying to identify setups in real time, plus battling against the emotions of having my own money on the line (this can really cloud your judgment in the moment), was not nearly as easy as I had expected. After four months of trading my small account, I found myself $1300 in the hole. From the day I watched my first video lesson, it took me a total of nine months just to claw back to break-even and another four months to have $10,000 in total profits. The point I'm making is do not expect to jump into this and be making thousands of dollars immediately. If you need fast cash, daytrading is more than likely not the answer.


Even if you meet both of these criteria, there are no guarantees in this game. I took a chance, and it worked out for me. There are plenty of experienced traders out there who are willing to try to help. But if you know that you can't stay disciplined or are just in this for a quick buck or out of desperation, in my opinion, your odds for long-term success are very low. 

6 comments:

  1. Out of desperation? Man everyone is here out of desperation. The desperation of no5 being poor or of not having to go work for someone doing a desk job, some dush who twlls you what to do.. etc... desperation is a positive in my opinion, not a negative... cause if you are comfortable where u are u will never work hard enough to make this work. Imo

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    Replies
    1. In my case, I would have to disagree with you that everyone is here out of desperation. I am truly interested in learning how the market works. No need for quick cash; however, I do like the idea that I have a hobby that can support a family. I have been trading a paper account and learning the inns and outs of the market for 7ish months now and am only now considering starting a real account as I am continually saving up to cover minimums and hopefully soon the PTD rule. No hurry for money, No desperation, just learning the strategies that make the few profit over the bulk.

      With that said, I have a question. Tim, Could you write a blog or even a quick comment describing what are the key differences that I need to look out for when I do decide to open an actual trading account. Right now I am using ThinkOrSwim paper money and the Speedtrader trial accounts.

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    2. Alex, I'm learning with a paper money account from thinkorswim too. As you know the data is delayed by 20 minutes, how do you deal with that?

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    3. Gerald P,

      Chart data and price action is real time

      Stan Ivanov

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