5 Steps to Day Trading Success.
No one can guarantee your success in day trading. It is a tough business as you are up against the best right from the start. From my own experience as well as from many successful traders whom I have coached, here are five key steps that, when followed earnestly, put you on the right path to trading success.
Step 1: Learn How to Read the Chart for Successful Day Trading
Many in the trading industry are looking to sell you the latest indicator or system. The claims are always high; the results, not so much. Eventually, you will find it unwise to rely strictly on systems and indicators. You get a signal to buy that was successful last week, but this time, it isn't. This happens frequently. It's unclear why it failed.
The best thing you can do for your trading is to learn how to read an uncluttered chart consisting of price bars and volume. Volume shows the fuel behind the market; price is the result of that fuel. When volume is expanding after a long rally, for example, but price does not increase, it could signal the market has reached a top. At the very least, it tells you that selling is coming into the rally. No indicator tells you this. There are specific price and volume patterns and trade setups throughout all phases of a market cycle. Learning these patterns will give you a true trading edge.
Step 2: Learn Day Trading with Sound Money Management
No trade setup is 100%. There will always be losing trades. Money management helps you determine how much to risk on each trade and still keep you in the game even with a series of losses. It will help establish position sizing and inform stop levels. Without sound money management practices, trading success will be elusive.
Money management is more than figuring out how much you should risk on any given trade. It also includes things like when to step up size. If you are in a trend day, for example, you know this market has high odds of closing on its extreme. This is the time that sound money management says put on your maximum position size. These times can make a big difference in you profit for the week or month.
Step 3: Develop a Trading Plan
No professional trader trades without a trading plan. A trading plan covers decisions that can be made in advance of trading the market. These include markets traded, trade setups, time frames, position sizing, risk parameters, how to take profits, how you will increase position size, what to do in the event of a significant drawdown, when to take profits from the account, and the like. When about to enter a trade is not the time to be figuring out how much to risk. It should go without saying that you follow your trading plan.
Step 4: Understand the Mental Game of Day Trading
There is a lot that goes on 'between the ears' that affects your trading. Few traders put much effort into the psychological side of trading until they are losing or find that their psychology is working against them-for example, they can't pull the trigger on a sound trade setup. Most professional athletes work on the mental side of their game because it gives them an edge in competition. The same can be said of trading. Psychology has two sides: one helps you to reduce and eliminate unforced trading errors; the other helps you to enhance your trading skills and abilities. Learn both sides to increase your chances of success.
Step 5: Practice Trading
Trading well depends on developing specific skills. How do you develop a skill without practicing it? Simulation and paper trading are highly valuable activities for the aspiring trader. Even experienced traders will practice trade a new trading idea. You will learn what a choice trade looks like, the market conditions in which it works best, the best entry triggers, and reasonable profit targets from practice trades.
Speaking of practice trading, a group of traders meets every week to practice trade the markets. Using only price and volume, higher time frames are first reviewed to develop a plan for the following day, and then the next day is walked-forward and practice-traded.
I hope you realize that in order to be a successful Forex trader, you will never shop around for
Subscribe to our FREE Newsletter and Get FX News & Trade Ideas Delivered to Your Inbox Daily
From - Dr. Gary Dayton
Article Source: http://EzineArticles.com/?expert=Gary_Dayton,_Psy._D.