How to Plan for Anything When You’re Day Trading
Have you ever considered devoting some of your time to decide on a day trading strategy? Maybe you’ve already begun reading all the articles and books you can find on day trading, and you’ve even caught up with the latest StockTwits review. Perhaps you have a mentor in the trading world who can help to guide you through making your first investment decisions and tell you which red flags to look out for. No matter how prepared you think you are, it’s important not to start day trading until you know that you’re ready to handle it if something goes wrong. Ultimately, no matter how successful your day trading strategy may be most of the time – you won’t be able to “win them all.” The following tips will help you to plan for anything.
Know What You’re Looking for In Each Trade
The first step in making sure that you don’t make any dangerous decisions with your day trading strategy is to create a mental checklist that every trade needs to satisfy before you get involved. Prepare a checklist with features that need to be available in the trade before you offer up your money. This will help to prevent you from funneling your cash into something for emotional, instead of logical reasons. At the same time, while it’s important to have a good reason for getting into a trade, it’s also crucial to know when you need to get out. A stop loss order will get you out of the trade when the price of your asset doesn’t move in the direction you were hoping for. Stop loss orders can offer valuable protection in the day trading world.
Understand Your Weaknesses
Next, remember that every trader has their own distinct strengths and weaknesses. As time passes by, you’ll begin to notice the things that you’re not very good at. For instance, you might be tempted to hold onto your trades overnight when you should really let them go. When you recognize your weaknesses, you’ll be able to start developing a plan that will help you to overcome them. For instance, if you realize that you’re holding onto a trade, even though your plan tells you to get out – you can shut down the trade immediately, then take a break for a while so you can sort your mind out in time for the next trade.
Don’t Risk More than You Can Afford to Lose
Finally, no matter how confident you feel during a day trading session, or how convinced you are that you’re “on a roll” it’s important not to risk too much on any trade. Ideally, you should stay away from trades that risk more than 1% of your capital. This ensures that any loss you take won’t damage your financial portfolio too much. Although it can be tempting to go over your limit when you think you’re onto something good, staying cautious will help to protect you from some serious losses that could harm your financial future.