Do You Have a Day Trading Personality?
You may have all the equipment and the knowledge, but do you have a mindset fit for day trading? There are four key criteria that you should strive to meet.
Many people jump into swing trading or day trading without doing a personality assessment. Having technical knowledge of the markets, enough capital to get started, a computer, and an account with a reliable brokerage platform won’t solely guarantee success. There are virtually no guarantees for your success, but you’re taking a huge risk unless you do a psychological self-assessment before committing to your new venture.
What is a day trading personality and how do you know whether you possess the key components of one? Here’s a comprehensive list of the core personality traits that most successful day traders have. Maybe you weren’t born with all of them. So, if you find that you’re a bit short in one or two categories, consider doing at least a few weeks of simulation trades before putting your real money on the line. When you feel as if you’ve incorporated the traits, you’ll have a better grasp on what it takes to make steady profits as a day trader.
Without a strong dose of patience, you’re apt to fail very quickly if you try to make profits on intra-period price swings. In fact, if you find yourself making lots of buys within a short time frame, you’re probably already deep into the dangerous marshes of impatience. The ability to wait for attractive opportunities is one of the central characteristics of a winning day trade personality. When you do your simulation work, try to write down some of the emotional factors that cause you to jump into deals too quickly. By catching yourself at these telltale moments, it’s possible to amend your habitual behaviour and train your emotions to avoid impatience.
A Constant Willingness to Learn New Things
It’s tempting to feel as if you know it all after a few successful, profitable days of making live trades in challenging markets. Avoid this temptation if you want to enjoy long-term success. Read books by some of the industry pros and find out what they did in the early years of their careers. One thing most of them have in common is a lifelong desire to learn new techniques, concepts, and theories. They never stop learning and never reach a point where they feel as if they have the securities markets all figured out.
Keep in mind that this new venture is not a hobby, but it’s your way of making a living. Work from your intellect rather than from your emotions. One bit of advice you’ll hear repeatedly is to avoid buying or selling if you feel angry, elated, sad, depressed, or vengeful. For some reason, these emotions tend to cloud the human mind and impede our ability to see reality. The translation is only entering into transactions when you are in a relatively balanced mood. If you’re not, step back and take a few minutes to calm down.
A Disciplined Approach to Homework
Never neglect due diligence. It’s easy to get caught up in technical charts and numerical analysis. If you are able to do research consistently, even for a half hour or so before the opening bell, you’ll be training yourself to learn all the factors that affect the price of a given security.