Day Trading is Business, Not Betting! So Start Treating It Like a Business
Updated: Mar 7
Day trading is not a game of chance that delivers a randomized outcome. Many newcomers approach trading with the wrong mindset, assuming luck is the sole contributor to winning. In reality, while you can get lucky once, you are unlikely to reproduce the same event. Successful day traders are not just lucky more often than others. They are disciplined, strategic, and market-savvy. They have made day trading into a profitable activity because they treat it like a business.
Creating a day trading diary
Your trading diary will include information and comments about your previous activities. Think of it as a breakdown of your successes and failures. It will help you understand what went right and wrong. Identifying mistakes, especially costly ones, is the first step to correcting them. The trading diary can review your risk management parameters, share size, trading timeline, etc. It’s the audit of your accomplishments to date, and it will ensure you can create an effective day trading strategy.
What to include in your trading strategy
Once you step away from the misconception of day trading as a hobby, you can start a day trading business approach. No business can survive without a strategy that determines the course of actions to achieve the defined objectives within the agreed timeline. As a day trader, your financial goal will affect your trading choices and options. More importantly, your strategic knowledge also means you can start trading futures and profit from changes in the price within the same day.
Money management vs. risk management
Treating day trading as a business makes it easier to establish a set of rules that will protect your funds and profits. Preserving capital is a priority, as a catastrophic loss is likely to leave your account empty. As a result, day trading needs a risk vs. money management strategy. Risk management refers to how much risk you are willing to take. But day traders need to control risks to preserve money. High risk can be synonymous with high wins but also high losses. Therefore, the strategy should stipulate clearly how much of your capital you can use for any trade. Successful day traders focus on the highest profit for the best manageable risk.
Determine your loss plan
Similar to your wins, you should also determine how much you are willing to lose on any trade. Discipline your day trading business by introducing an automatic stop for the day once you’ve reached the acceptable loss amount.
Keep on learning
Last but not least, no business can evolve without constantly learning about the relevant market, technology, and principles. The same thought applies to day trading. Create regular review periods to check the result of your strategy and adapt to new events. It’s also the ideal time to research new trading tools and strategies. Perhaps your objective has changed? Use this opportunity to make sure your day trading activities reflect your goals. Many day traders use the periodic review to make sense of their trading diary and learn the lessons from past activities.
In conclusion, successful day traders are not just lucky. They have a safe business plan that acknowledges their strengths, market knowledge, and objectives. Treating day trading like a business puts you in a better position to eliminate the uncertainties related to emotional behaviors, lack of know-how, and market fluctuations. Don’t succeed by chance; succeed with a knowledgeable, strategic, and meaningful plan so you can reproduce your success.
Looking for further details on what it takes to become a successful Day Trader? Check out our entire resource guide on best equipment, typical new trader questions, and even how to get funded as a trader!
Published by Day Trader Resources | Contributor / Editor: Celine | Date: September 2, 2021 ©2021 Day Trader Resources is a ™ of Vigor Media LLC | All Rights Reserved