If you are committed to trading on a day to day basis, then you are a day trader. In this article, I am going to explain tools and strategies that will help you succeed in day trading
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What Day Trading is not?
Let’s say we have trader A and trader B; trader A study the chart daily and place trade daily, while trader B looks at the chart once in a week and place trades maybe once in a week. The former is a day trader while the later is not.
The focus of day trading is to make daily consistent profit. A day trader take advantage of available asset, from currency trading, synthetic indices trading, cryptocurrency trading, etc. to win in the market.
How to Succeed in Day Trading
Let’s start with an important question:
What is your trading method?
A trading method or strategy is a set of rules or principles a trader set aside to guide his or her entry and exit from the market. A method is one of the first thing a trader should do in order to have a direction and a focus in the market.
If you called yourself a day trader and you can’t communicate your strategy effectively, then you have a long way to go.
To have a good method, the following are very important:
1. Taking successful trade is a result of proper thinking
Your method or strategy will have no good effect if you can’t be in control of your mental state. In view of this, there are certain questions you must ask and answer within yourself before thinking of a becoming a good forex trader. Some of these questions include:
- Why am I trading?
- What is my daily/weekly and monthly target?
- What is my risk appetite? etc.
Trading strategies will have little to no value if the mind behind those techniques
has not been properly prepare
Your strategy is just not going to fly, if you are scare of using it, that is while “Proper thinking” is very important. Proper thinking entails you looking at the chart, understanding the flow of money and implementing your trading strategy once an opportunity present itself in the market.
2. Be Forward thinking in your analysis
When doing your analysis, start with a forward thinking approach. For instance, I always asked myself, where will this trend go in a week time? Understanding this simple fact, can help you cut down some loses. If you are trading a market like Boom and Crash, maybe you discover that Crash 1000 will buy for a week and you decide to go long.
As a trader, you should understand that even if a trend is going long say for a week or more, there are bound to be some short term retracement, except maybe there is a market force that change the overall direction of the trend. This market force can be news, liquidity gap or any other dynamic in the market.
So back to our Crash 1000 which is available only on Deriv. Based on the analysis above, you can place a buy and put your stop loss below the next support, then allow the trade to place out.
3. Follow the footprint
One of the beautify thing about trading is this: the market always has a structure. There is no market without a structure. And the structure is delineated by chart. If you don’t know how to read the chart and mark some key point of interest, entry and exit in the chart then you are lacking as a day trader.
To succeed in forex, you need to know how to follow the footprint of the market. This is very simple:
- Understand the high and low of the day
- Know how to draw trendline
- Understand key support/resistance area on the chart
- Understand candlestick formation, etc.
4. Invest in knowledge
I am successful in forex today because I invested in knowledge many years ago. My advice to new trader is this- Knowledge is power, only if it’s the right knowledge, so seek knowledge first and profit will come. Success in day trading is a vague term, that can only be define by individual trader. Be willing to sacrifice temporary loses at the expense of long term consistent trading profit.
The Big Question – Are you trading or gambling?
Last month I had two mentees; from their trading history and my analysis, I realized that both of them were gambling not trading. Trading is an inform decision that happens when you have a proper entry position, proper exit position and then understand proper position management. Whereas gambling is a situation where you just jump into the market because you think the market is set for a buy or sell with the aim of getting quick profit.
To become a trader not a gambler in the forex market, you need to master the basic art of trading.
What is trading mastery?
Trading mastery start with self mastery; you can’t achieve trading mastery if you don’t have self-mastery. Self-mastery start with self control- in the sense that:
- If you can’t control yourself from jumping into the market without proper knowledge of what is going on in the market you don’t have self-mastery. Meaning if you see a position that say sell, you need to abort the fear of missing out and look at your strategy before making any decision
- If you are comfortable at placing your trade when opportunity present itself after looking at your strategy you understand self mastery
Trading mastery is the product of proper thinking, strategy and your decision in the market.
Basic tools for Day Trading Success
To be successful as a day trader, you need to master a few trading tools: Some of them may include:
- Trading Platforms
- Trading Journal
- Chart analysis website
- Economic calendar, etc
The two most popular trading platforms are Metatrader 4 and Metatrader 5. You need to know how to effectively navigate through Metatrader 4 and Metatrader 5, understand how to log in to your trading account, place and close trade, add indicators, add expert advisors, copy trading scripts, etc.
I always advised all my mentees to keep a journal. A trading journal will help you to monitor your trading progress and can be handy if you want me to mentor you. Have a notebook but offline and online where you record your journey in the forex market. The Journal can have your plan, strategy, equity, daily income/loses, suggested learning materials, etc.
Chart Analysis Website
You need to master the use of chart analysis website in analyzing your trades, this is not compulsory but it can give you a bigger picture of the market. For instance, I love using a chart analysis website like tradingview because it has some analysis features that is very valuable to my trade analysis.
If you are a currency trader, you have to make economic calendars your friend. This is important because, there are some important economic event that can change market direction within a short while. It happen to me during the height of the Brexit talk where some trader lost millions buying GBP against Japanese Yen.