When your just getting started day trading it is very tempting for a new trader to want to just jump in straight away after learning the very basics. This can either be due to the influence of online “gurus” or the lure of overnight riches. When such a mentality hits you, failure is eminent. Besides learning technical skills such as reading charts and understanding stock information, there is a host of other questions you need to ask yourself before really taking the plunge.
Part time or Full time?
If you want to become a part-time or full-time trader, it is important that you take the time to research and plan your trading activities; these are essential steps in your overall success as a trader. Day trading is not something that you will become skilled at overnight. We often recommend that you have at least 2 years of savings in the bank before going for this full time.
Do I have my family’s support?
Many traders often quit their jobs to go into this business. However, many fail to consider that once you quit your job, you stop your primary stream of income. If you have a large family to feed, this is not a decision to be taken lightly. Always insure that you have a stable source of income coming in before deciding to trade full time.
Can I deal with stress?
Let’s face it, day trading can be extremely stressful. The amount of money you are dealing with is large and the potential of losses can be substantial. You need to ask yourself if you are psychologically able to deal with the stress that comes with day trading, that includes losing a certain amount of money within a few seconds without it emotionally impacting your life outside trading.
Of course, there are many more aspects to trading which need to be considered and these are just some examples. As you move along the course, you might ask yourself more questions as to whether day trading is the right path for you. Write them down and consider them carefully.
Am I emotionally attached to my trading money?
Trading under the influence of money is dangerous to your budding market career. When you are executing a trade, it needs to be thought about carefully and executed efficiently. The critical thing is how one handles a loss. There are traders who have $10,000 accounts but lost $2,000 for the day. The result is that they become so stubborn and end up trying to “revenge” trade the same losing stock. This turns into a vicious cycle that destroys their entire trading account. This is the best example of how emotion wrecks a trader. When you are emotional, you make irrational decisions, and you become targets of other traders who are better at controlling themselves.