Day Trading Strategies to Increase Your Profitability
Day traders are unique individuals. Similar to entrepreneurs, traders work obsessively to master their craft. We’ll stay up late, wake up early, and repeat the process the next day – all in efforts of living an extraordinary life that most can only dream of. There is a saying that, “Entrepreneurship means living a few years of your life like most people won’t so that you can spend the rest of your life like most people can’t.” The same is true for trading.
Thriving in the world of day trading CMD368 requires ambition, hard work, and persistence. The road to day trading success is paved with blood, sweat, and tears (okay, maybe not blood). Whether you are just getting started or you’ve been on your journey for a while now, you’ve probably discovered that day trading is not easy. You’re putting your hard earned money on the line and facing new challenges daily. That said, every challenge you conquer takes you one step closer to your ultimate goal.
1. Avoid Overtrading
Traders are ambitious, sometimes too much so. Many traders feel the need to always be doing something. It’s important to remember that trading requires patience, and the quality of your trades is far more important than the quantity.
The Pareto Principle states that, “80% of the effects come from 20% of the causes.” In trading terms, this would translate to, “80% of your profits will come from 20% of your trades.”
2. Avoid Under-trading
Do you ever find a great trade setup that you don’t take action on, only to look back later and realize your idea was spot on?
You’ll often hear traders and educators discuss the topic of overtrading, but few discuss the concept of under-trading. Under-trading can be attributed to a variety of factors, including lack of confidence and analysis paralysis. Simply put, traders find the right setups but fail to pull the trigger on their trades.
Keep in mind, there is a major difference between under-trading and avoiding setups you are uncomfortable with. The former is a psychological struggle while the latter is a logical decision.
3. Take Control of Your Losses
As traders, we’re always focused on profits. After all, the main goal of trading is to turn money into more money. It’s easy to get carried away and forget about the very real potential for losses. In reality, limiting losses has the same net effect as increasing profits. Learning how to manage risk is just as important as finding profitable setups.
The key with risk management is to have an airtight plan. If you say you’re going to stop out when the stock hits $5, stop out when the stock hits $5. If you’re not comfortable losing more than $300 on a trade, cut losses at $300.
4. Simplify Your Approach
There is an incredible amount of data available to traders in this digital millennium. This data is intended to improve our decision-making abilities, however it can also be overwhelming. As a trader, it’s your responsibility to create a simple strategy that is easy to execute. After all, a stock can only do one of two things: go up or go down. If you need to check ten different charts, reference ten different technical indicators, and flip on CNBC to see what Jim
Cramer thinks of your trade, you are overcomplicating your trading process.
5. Trade Robotically
As you begin to simplify your approach to trading, you can focus on making your strategy more robotic. The goal is to take all emotions out of trading so you can take a systematic approach to your trading. You make hundreds of decisions every day, most of them without much thought. This process is known as automaticity, and it allows humans to function efficiently.
For example, you generally don’t overthink your options when buying lunch. You know your budget and preferences and make a decision accordingly.
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