Here’s a weird fact about day traders. Almost all day traders, when starting out, develop bad habits before good habits. No one really understands this concept, but it seems to hold a universal truth.
My theory, since I too fell into this trap, and it took me YEARS to get rid of my bad habits and allow my good habits to become the norm, is impulsiveness, thinking you can beat the market, and lack of education – in my case even though I was studying with an academy I felt I had to start trading live way before I was truly ready and felt confident about it.
Practically all traders will tell you that they hit the markets way before they were ready. Most lost bundles due to lack of education and thinking they can buck the system and then went in one of 2 ways – they got the proper education (whatever it was a school or workshops, etc…) or they quit and never returned thinking that it’s too risky and a gamble (driving a car without ever learning how is also risky and gamble, you need to learn what you’re doing first).
Since you don’t need to prove your education levels or understanding before entering the markets, all you need is the money, anyone thinks they can do it.
And then they find out what it’s all about.
However, the absolute NUMBER ONE bad habit that you can avoid from the get-go is risk management.
This is something that all pro traders will tell you, all schools and experts do too. However, most traders (me included) don’t believe it’s true. Until you lose too much, all because you couldn’t handle the fact that the trade simply didn’t work out. So instead of getting out and moving on to another good trade (because there is always another good trade coming), you move your risk management. Or remove it completely, praying, hoping it will go back in your direction.
Praying and hoping in day trading is where you know you are in a seriously bad trade. Unprepared and screwed. A baseball player never enters the stadium wishing and praying and hoping they will win. They know exactly what to do, if they mess up, they move on quickly to do better moves. Because it’s not about crying over the bad, but immediately going forward to a better position.
The same with day traders.
RISK MANAGEMENT is the ABSOLUTE MOST IMPORTANT element of trading. If you don’t follow a sound risk management plan you will surely lose and not only the money but emotional capital too.
Take a look at part 2: Profit Management.
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