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Characteristics and Personality Traits of a Good Day Trader
Day trading is a great career option — for the right person in the right circumstances. Being a successful day trader requires certain personality traits like discipline and decisiveness, as well as a financial cushion and personal support systems to help you through the tough times. Think you have what it takes to go into business for yourself as a day trader? See how many of these characteristics apply to you:
Discipline: Day traders maintain strict discipline about how they approach their trading day and what they do during market hours.
Independence. Most day traders work at home, alone. If being in charge of your own business and your own trading account sounds exciting, then day trading might be a good career option for you.
Quick-wittedness. Day trading is a game of minutes, so a day trader can’t be deliberative or panicky. Traders have to have act quickly when they see a buy or sell opportunity.
Decisiveness. Can you make a decision and act on it? Can you assimilate information quickly into a good strategy? If you screw up, do you figure out what you did wrong? If so, you have the basic personality of a good day trader.
Persistence. Good day traders are persistent. After they find a strategy that they trust, they stick with it.
Tech-savvy. If you like to mess around with programs, don’t mind maintaining your computer, and understand how to set up your hardware efficiency, you’re in good shape for day trading.
Interest in the markets. If you watch the business news for fun and have been following the securities business for years, you might be a good candidate for day trading. An understanding of the cycles and systems that drive securities prices will give you a foundation on which you can build.
Investing experience. If you’ve invested in the past, you’ll know some of the language and limitations of the markets. And that will give you a base to work from.
Knowledge of trading systems. It can take a long time to find a strategy that works enough of the time to make it worth your while. If you’ve taken the time to create and test a good strategy, then you’re ready to go.
Can afford to lose money. You shouldn’t be day trading with money you need to live on. Be sure to set aside enough money to cover your living expenses while you get started. And keep a second pot of money, your walk-away fund, so that you’re free to quit day trading and move on to your next adventure if you decide it’s not for you.
Has a strong support system. Trading is stressful. The markets gyrate with news events that no one can foresee. Good day traders are psychologically strong. They have people and activities in their lives that help give their brains a break from trading, ranging from regular exercise routines to good friends to hobbies.
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Internet Resources for Day Traders in Canada
Here are some good Web sites for Canadian day traders, offering day trading strategies, along with techniques and ideas on managing risk, taxes, and stress:
Bill Cara isn’t a day trader, but he is a full-time investor who pays careful attention to the markets. Each day on his blog he records his observations about what’s happening. Bill Cara's blog is good reading.
Zen Trader is a blog written by Vancouver’s Jeff Pierce, who has been trading for 11 years. He’s a momentum trader, focusing on market timing. He updates his blog daily and has a plethora of interesting charts, economic commentary, and tips on how to trade stocks.
IndexArb.com has useful information about trading futures on the market indexes. IndexArb lists the premiums on different contracts, offers strategies for different market conditions, and gives you some good background information to help you make your own decisions.
MyPivots.com runs through key price and economic data every morning, with trading calculators and a forum. MyPivots is of most interest to people working with eMini index futures.
TraderInterviews.com features educational and inspirational discussions with different traders.
Trader Mike, (day trader Michael Seneadza), frequently updates his thought-provoking blog. It includes his trading journal, thoughts on the markets, and his own advice on day trading, which he admits is not definitive.
Traders Laboratory is a good site for meeting other day traders online, finding Web-based seminars, reading traders’ blogs, or checking out economic release calendars.
Facebook has brought together like-minded individuals who share their thoughts and ideas on day trading. Type “day trader” into the Facebook search bar to find the groups that are available. Here are a couple good ones to start out with:
Twitter is home to many interesting traders and investment professionals who are worth following, including
Jeff Pierce — author of Zen Trader
Mike Jackson — This Canadian bond trader tweets about bonds and other economic insights.
Jeremy Korpela — Korpela is a Calgary-based swing trader who posts his thoughts on the markets.
Brian Shannon — Shannon, a trader for 11 years, is author of Technical Analysis Using Multiple Timeframes.
Timothy Sykes — This penny stock trader turned $12,415 of his bar mitzvah money into $2 million.
Ashraf Laidi — CMC Markets’ chief market strategist has more than 8,000 followers who play close attention to his advice on the forex market.
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Common Day Trading Mistakes
Day trading is tough. Most day traders lose money, in part because they make obvious, avoidable mistakes. Here’s a list of some of the most common mistakes that day traders make. Following them is no guarantee that you will make money trading, but it will certainly reduce your risk and improve your odds of being a day trading success in Canada.
Starting with unrealistic expectations. Some research shows that 80 percent of day traders wash out in the first year. Yes, some traders make a lot of money. But they are the exception.
If you go into trading knowing that it’s hard, that you should risk only money that you can afford to lose, and that you need to think about it as a business, you’ll have a leg up on those who think they’ve found an easy way to make millions from the comfort of their own home — and who are then stunned to discover they are broke.
Starting without a business plan. Successful businesses have business plans, and your trading business is no different. You need to specify what you are going to trade, and when, and how, and with how much money, before you get started.
You need to determine what equipment you need, what services and training you want, and how you will measure your success. Having the plan will keep your expectations in line and create a professional starting point for your new trading venture.
Starting without a trading plan. A business plan sets the framework for your trading business, but you need to fill in the details. How are you going to trade? What signals will you watch for? Why will you enter a position, and why will you close it? That’s your trading plan.
Good traders have trading plans, so that they know exactly what they will do as they see opportunities in the market. This reduces the fear and doubt that can unsettle most traders and it heads off the panic that destroys more than a few.
Failing to manage risk. Even traders who stick with it have many losing trades. That’s why they have risk management systems in place. Their trading plans include stops, which automatically execute buy or sell orders when securities reach predetermined levels. They also have a money management system so that they risk their capital appropriately.
If you’re going to day trade, use the protection offered by stops and sound money management. Don’t risk money you can’t afford to lose, and plan for the risks that you take.
Not committing the time and money to do it right. Day trading isn’t something you can squeeze into an hour a day as a hobby. To do well, you need to set regular hours and have enough money to generate reasonable returns without unreasonable risks. If you have days of losses, a small account will quickly end up with too little money to meet minimum order sizes.
On the upside, a 1 percent return on $1,000 is equal to $10, and a 1 percent return on $100,000 is $1,000. If you have more money to begin with, the dollars you make from day trading will seem more real to you.
Canada doesn’t have rules on how much money you need to day trade, but brokers often require a trader to have a minimum amount of dough in their account to get started. It depends on what you plan to trade, but it can range between $1,000 for stocks and $25,000 for options.
Some Canadian brokers follow the U.S. Securities and Exchange Commission rules that define “pattern day traders” based on their trading activity and as customers with $25,000 in their accounts. In any case, if you have $25,000 you can afford to lose you’re more likely to be a successful day trader than if you have only $2,500.
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Source:http://www.dummies.com/how-to/content/day-trading-for-canadians-for-dummies-cheat-sheet.html
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