Characteristics of a Good Day Trader
Day trading can offer an individual an exciting, fast-paced occupation filled with rollercoaster turns and, at times, dramatic pitfalls. That being said, a day trading job for everyone. Day traders not only to have the knowledge and experience the job requires, they also need a tremendous amount of discipline and an ability to deal with monetary loss and periodic disappointment.
Due to the risky nature of day trading, day traders must have a wide range of financial and investment knowledge. Success is derived from many things, including knowledge and a keen psychological approach. Day traders need to be able to take informed risks as well as losses. Some individuals enter day trading, only to give up because they can’t take the emotional effects of the position. For most, the fear of losing large sums of money in such a short amount of time is a deterrent (as well as the pressure of making quick, snap of the finger decisions). Others may have the fortitude, but they are too greedy. Most day traders follow a strict schedule and adhere to strict guidelines in trading strategies.
Knowledge and Experience in the Marketplace
Although a college degree isn’t a prerequisite to enter the day trading arena (although a finance or economics degree would serve as a good foundation), day traders need to have in-depth knowledge of the financial and investment marketplace. Individuals who enter the day trading industry without sufficient knowledge of the marketplace often end up losing money.
A large amount of start-up capital is often needed to begin day trading, and to see worthwhile returns. Due to the risky nature of day trading, a beginner day trader cannot expect to start making money instantly; they need to be prepared to suffer some losses. Therefore day trader should have a sufficient amount of capital to trade with; capital that they can afford to lose.
There are two important reasons for this: 1. It will protect them from losing funds they need to live on, and 2. It will help to eliminate emotion from their trading.
All day traders need a trading strategy. One cannot expect to enter the day trading arena and “wing it.” While there are many different strategies and styles that day traders can utilize (see Day Trading Strategies and Styles), it may be most beneficial to a beginner day trader to become well-versed in 1 or 2 of these strategies.
Learning and utilizing a day trading strategy is useless without discipline. Many day traders end lose a lot of money because they fail to adhere to their strategies, and often end up taking too many ill-informed risks. Due to the volatile nature of trading, and the sharp turns the market can make, discipline is essential for a trader to weather the storm of a typical trading day.