My Quick Guide on How To Become A Day Trader

Being a Day Trader requires extreme attention to detail, an analytical mind, steel nerves, long hours, no one to tell you you're doing well, and the ability to do what you know is right when the whole market is telling you you're wrong.

Are you ready for this? It certainly won't be easy, but can be very gratifying, and potentially very lucrative.

There is many more markets to choose from for a new day trader than in times past. Here's just a few of them and their pros and cons.

Stock Market

Pros - Well known, plenty of available information, good liquidity, lots of choices.

Cons- the volatility can be too much for new traders, leverage can be hard to get when you're a small account.

Options

Pros - Sweet leverage capability - amazing risk control using different spreads.

Cons - Sometimes thinly traded, more likely to be manipulated by larger players.

Penny Stocks

Pros - Huge volatility

Cons - Huge volatilty

Forex (Currencies)

Pros - Excellent Liquidity, more stable, low spread, easy controllable margin.

Cons - Less likely to make big moves - must use margin to make significant gains without large amounts invested.

The next important part of becoming a day trader is you must make a game plan with very specific rules. I suggest if your new you keep to a simple trading system with widely available information so you don't have to spend too much of your budget on special reports or super powerful software programs. While these programs can help you a lot, they won't do you a lick of good if you haven't learned the other important skills of being a trader first like discipline, mental stamina, and money management.

I suggest starting with a combination of 3 non-correlated indicators that are available for free with your broker of choice. An example would be combining a simple moving average crossover, with a gain in average trading volume, with companies that have improved their earnings this year.

Once you choose your trading plan, make very specific rules about when you enter the trade and when you exit the trade. Please, plan a stop-loss.

Now test your plan, both with back testing and real time testing using a "play" account that doesn't require cash. Many online brokers have these fake account available for testing.

Warning:If your back test shows a 90%+ win rate you've probably added way too many factors for success. This is called fitting the curve. What will happen is these trade situations just won't ever pop up in real time. You don't want to use more than 3 or 4 different indicators. Look for trades that have a 60% or so win rate, but with a much larger win value than loss value - that's how you succeed.

After you have a successful trade plan, trade it until you have come up with a better plan that you have again tested. You should continue to work on new trading strategies, but not using your real trading account - that's called gambling.

Having the best trading strategy in the world won't mean a thing if you are wiped out from a few bad trades in a row. Just say it outloud now, "I will have losing streaks!" Accept it, it's part of day trading and you have to plan for it.

For someone just learning to become a day trader I reccomend only risking 2% of your portfolio on any trade. That means set a stop loss at the start so you no what your risk per trade is. Also, try to plan trades that have a win value at least 3 times the loss risk.

Treat your day trading job like any other job, make sure you get at least your base hours in.  Also schedule time with your family and friends and keep the promises you make.  This is good for their health as well as yours.  If you family starts to feel scorned the drama will creep into your trade plan.

Also, you'll probably have a hard time in the beginning and quitting will sound good.  Hang around other successful traders either online on forums, at conventions, or in schools.  Don't spend time around naysayers.

The last important aspect is you must continue to learn, from the stock market 101 basics to advanced statistical analysis.  If you love day trading than learning the details should become fun too.