One of the many things that attracts people to day trading is that
you are your own boss and get to work from home. However, if you are a lazy
person with no discipline do you think you are going to be a good fit to be
your own boss? If you want to have any success with day trading you must treat
it as a business and I will outline some key components in this post.
Lead up Moments
I would wake up late, usually 6:00 pacific time, thus giving
myself 30 minutes until the market opened. I would get out of my bed and go
straight to my computer. I did not have much for breakfast, maybe a granola bar
and some fruit. I then rushed to do my scans and had very poor preparation,
often relying on others to post their watch list. Simply put, I did not take it
serious enough. I came to the point where I did not even care if I lost money
and this is such a dangerous state of mind. After a couple blowups and being
honest with myself, I recognized that in order for me to have any success with
trading I needed to make some serious changes and I needed to start within
myself.
Treat Day Trading as a Business
Goals and Vision
First and foremost, just like any business, you need to set goals
for yourself and have a vision. What is it that you want from day trading, set
clear expectations and goals for yourself that are specific, measurable,
attainable, realistic and timely (SMART). Did you decide to start day trading
for an extra source of income? To become a millionaire? To transition to a
different career? To find a new passion? This needs to be identified. Your
goals will be different depending on why you started to day trade in the first
place and just remember to be realistic with yourself. Far too often people
start day trading to try and make a quick buck and they have no vision and
long-term goals, which is why most will give up within their first few years.
Most businesses struggle to make a profit in their first few years, it takes
time, and this can also be said about day trading as it is a business.
Your goals should be written down and be somewhere visible. Simply
having a goal in mind is not enough and remember to use the SMART acronym. A
Short-term goal could be “I want to be consistently profitable with 1
setup/pattern with a 3:1 risk/reward or greater in 3 months time.” A long-term
goal could be “I want to turn my $3000 account into $6000 in 1 year.” Although
I am not a huge advocate of setting dollar goals, I do believe having a
long-term goal in mind is okay as long as it is realistic.
Preparation
I am sure most of you recognized one of my issues; I was waking up
way too late and was poorly prepared. I now wake up much earlier to give myself
plenty of time to get ready. I recommend eating a good meal that will keep you
energized and grabbing a coffee to help keep you laser focused. Giving yourself
an adequate amount of time to prepare is so crucial. If you wake up late and
are having to rush to your computer this will translate into frantic trading.
If you do not already have entries/exits in mind prior to the open from drawing
key support/resistance lines and looking at key areas of the chart you will
likely just randomly enter with no idea where the stock is heading. Rather,
when you wake up with enough time to prepare you can calmly go about your
morning routine and this will translate into calm trading, almost robotic like.
This is the key here, develop a morning routine that becomes robotic like that
helps you prepare for the trading day giving yourself an edge over the
latecomers. Also, take a look at your trading environment. Does it have
calmness to it? Or do you have papers all over the place and is in an open area
where you can hear your screaming kids. I highly recommend having your trading
office in a relaxing environment that creates a calming energy. E.g. do not try
and trade in a loud environment full of distractions, trading is stressful
enough as it is.
Have a Trading Partner
This is all about collaboration and helps keep you accountable.
This does not necessarily need to be someone you are trading live with
everyday, but it should be someone who will help keep you accountable and
someone you can review your trades with. A lot of people day trade with tunnel
vision, meaning they only see/hope for one scenario and that is all. It may be
as simple as having a trading partner to tell you to zoom out for you to
realize what the fuck you are doing. Not many people go into business all by
themselves, so why should day trading be any different. Share your goals with
this person, share your rules, and talk with them during trading hours to
discuss potential trades.
Spend Money to Make Money
I already went over this in my last blog post so I will keep this
short. If a new restaurant opened would you go to it if they were too cheap to
turn on the heat in the winter or used paper plates because they wanted to save
money? Probably not. You need to be well equipped if you want your business to
be successful. E.g. decent computer with two or more screens, decent broker and
not being cheap with borrow fees, getting a scanner or joining a trading
community, and buying educational products. This is your tuition; do not expect
to make any money if you are being cheap.
You may be saying to yourself, I already do all these things, why
am I not profitable yet. It takes time, keep working at it. Very few businesses
see immediate success and the ones that do are outliers.
