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4 Habits of successful day traders

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Day trading is not easy.

Never believe anyone who says it is. It’s work, it’s a slog and it can be either wildly profitable or wildly unprofitable, often very quickly.

But it’s not impossible.

Like any skill, successful day traders know the ins and outs of what they’re doing and develop a long list of techniques to help ensure profits day, after day, after day.

What do they know that you don’t?

After working with hundreds of day traders over the last several years, I put together some basic steps that will increase your odds of generating profits during intraday time frame.

Habit #1: Never day trade without a plan

Many traders see an opportunity or hear news during the trading day and decide to enter or exit positions based on what they just saw or heard. Day trading is very emotional and the financial markets are the biggest manipulators of these emotions.

But firing from the hip never works. Your entry and exit rules must be planned well ahead of time.

You also need to have a solid contingency plan if something unexpected occurs during the trading session. Sometimes the news or another fundamental announcement can have a major impact on your position, so you need to prepare for every foreseeable situation that may occur.

Habit #2: Know your intraday price levels

You would be surprised how many traders ignore this fundamental truth.

Each day the market trades at important intraday support and resistance levels. These levels dictate the previous few days short-term support and resistance areas as well as price points that are vulnerable to breakouts and pullbacks.

You’d think these numbers are worth watching, right?

For example, maybe SPY’s resistance level hits the upper trend line at the exact projected price level for several days in a row. This is something you should watch out for every day using intraday charts. I use 15 minute bars for stocks and 5 minute bars for other financial markets.

Before we continue to habit #3, I want to say.. if you don’t have a solid plan or don’t know your price levels, let us help teach and guide you towards success.

Habit #3: Make sure your strategy is realistic

Swing traders seeking day trading success find strategies that look good on paper but are impractical or highly difficult to execute under real market conditions. I would estimate that roughly 70% of all strategies that look good on paper won’t work out simply because execution is unrealistic, there’s too much slippage or the set up occurs so infrequently that waiting for it to occur is like waiting for a UFO to land on your doorstep.

I fell into this trap myself when I first started out.

I found the perfect trading method that I tested on paper for a month. After opening a brokerage account and testing the method with real money, I found that executing the strategy to get the price I wanted was too unrealistic and my profit on paper was completely off my real profit on the trades. But since then, I’ve been able to identify the perfect strategy that works for me.

My suggestion is to start with as little as 10 shares and test the strategy to see how it performs on paper vs. actual performance.

Habit #4: Know the underlying market conditions

The final mistake many traders make when seeking day trading success is ignoring or going against the current economic conditions.

The market and your day trading setup must become one for you to succeed. Keep an eye on the daily economic conditions and the daily charts of the stocks and the indexes you are trading so that you know which way the wind is blowing.

For example, when the market is moving upwards with strong internals and an overwhelming majority of stocks moving strongly upwards, taking a short position in a stock or the stock index would not be such a great idea. However, when the stock market is much softer and bouncing off resistance areas, this suggests that bearish set ups are ideal for day traders. Without looking at the underlying market conditions and moving with the market, day traders are swimming against the tide. I want you swimming with the tide, finding that momentum, and winning big.

Like I said, day trading success isn’t some sort of white whale. It’s possible to trade profitably, it just takes some hard work, dedication and an understanding of the basic trading principles I just laid out.

By following these principles, you will increase your odds of success that much more… and if you’re looking to add more incredible principles, especially regarding momentum, check out my training with Roger Scott where we show you exactly how to identify momentum building stocks (big profits await).

And it’s not just day trading. So much about trading sounds a lot more complicated than it is. Really, all of this is about getting an asset at a discount to its true value, selling it once it has reached that value and pocketing the profits. But knowing when to do both of those things is where it gets tricky. Momentum trading is a good technique to know for this, as it can point you toward when to buy and sell according to the strength of recent price trends. 

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