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Day Trading Misconceptions and Myths

Day Trading Misconceptions and Myths





Full Transcript

Today we’re going to be covering the most common misconceptions and myths about day trading because the deal is here. That there are way too many misconceptions that people think exists in the day trading in the street, which can be totally avoided.

And I just want to get past them right now, because what happens is and this happened with me and many others is that you believe that these are true and they’re completely untrue. So let’s just get past them so that you can start fresh and know that these do not really affect your trading. What so ever.

OK, the first one risk an up front cash. All right. There is definite risk. There’s risk with every single thing you are going to take on in life. Right. You want to open up a restaurant and there’s a risk that you’re going gonna cough up 20, 30 thousand bucks and not a single person is going to arrive to your restaurant. Right.

So in my way of looking at it, you are putting up twenty thousand dollar risk in day trading. You have the control of what you risk. This is called part of your strategy. Normally the way it works is between 1 percent to 10 percent of your portfolio.

As you start to understand the market that you are focusing on, you need to go back to the last video of what you should trade. Every single one of those has a different risk level. Also, it’s what your risk level is. Normally I don’t ever risk more than sixty two dollars and fifty cents per trade per contract. Right?

That doesn’t sound like too much. So my risk level isn’t high, right? So it’s risk versus reward. You have to have a plan. I go over this a lot more in the Beginners Bootcamp – How to Day Trade. But without that, risk management in place.

You will lose it all, but that’s what gamblers do, right? They just sit at the roulette table and just blindly put money in. You will never do that. Excuse me. If you are a professional day trader, you will not do this. OK. Your risk is fully managed, fully controlled.

And this is very important for you to understand. You will not lose it all. It’s it’s just not possible. Right. You need to have control over it. And that’s how it works. OK.

So the second part of the first misconception is the amount of cash to put up. Right.

Recommended Read: Useful Degrees For Trading Stocks

How to Day Trade – Financial Markets

How much money do you really need to invest to start to day trade?

Besides, the obvious of you do need an education. You would not become a piano player if you didn’t hire somebody to teach you how to play the piano, right. So you will need to put that into account. There are many different academies, many different educations. I go over this a lot more talking about the different types of educations in my beginner bootcamp, but it’s a nominal fee, right?

Because honestly, if you just go in blindly, you will lose a lot more than what you would have. Invested in your education. So with that being said, how much money do you actually need in a broker’s account?

There are four different markets that you need to focus on. Normally, a lot of the brokers will tell you five hundred dollars, in my opinion. Two thousand dollars is a very good amount for futures, probably forex stocks. It’s different unless you work with penny stocks. You can probably get away with two thousand dollars stocks.

The thing is, you need to upfront a lot of money first to make any gains. OK, so it’s a different way of looking at it. But ten thousand dollars is not unusual. Right. When you hear twenty five thousand dollars, that’s totally untrue. You do not need that much money.

You do not need that much money. And like I said, with futures. Excuse me. Two thousand dollars is plenty. OK. What kind of an education and what kind of skills do you need to have before becoming a day trader?

How to Day Trade – Math skills Are they necessary?

You do not need any math, any math at all. I have no math skills whatsoever. I use my calculator for everything and finance and economics. Just those two words make me freak out. I don’t know what they mean. I don’t even think finance and economic majors know what they mean. You do not do not need either of these. OK. These skills that you will learn about reading the market. Understanding the market. Anybody can learn that, anyone can learn that the most important thing that you will eventually understand is discipline, consistency. That’s it.

Those two are the most important. Once you have developed your plan. OK. I mean, I was a travel writer and a fitness instructor. I have zero math economics finance in any of my background. And anybody in the majority of the traders that I know, none of them have this. None of them. OK. So you need to understand that anybody and everybody can be a day trader. Third, stress.

Yeah, when we’re watching Wall Street movies or the New York Stock Exchange floor and it just looks like it’s just nothing but ulcers and chaos and stress happening. Right. Honestly, you don’t need that. Ever since I started day trading, I’ve actually been laid on a spiritual journey. It’s very ironic. I am not one to have even thought of meditation or any spirituality, anything, but that’s what becomin a day trader has done for me.

What it makes you do is it makes you surrender yourself and trust yourself. And that usually happens on a deeper level. So when you’re, as you know, thinking that stress is involved, you have got to understand there’s good stress and then there’s crazy unnecessary stress. Yet for sure, you’re going to be a little bit stressed, right? You’re putting money on the line, but you’re going to be stressed like that with everything. Right. But if you were confident in your plan.

If you have complete trust in yourself and the plan. That stress is a good stress. It’s like a performance. It’s a good performance high. Right. Normally, all the athletes that we see, they are so stressed.

But Michael Jordan probably was so stressed every time he was on that field that he was on the basketball court. But he. It wasn’t a bad stress, right? It was good. He’s practiced. He knows. He knew his moves. And that’s what happens when you are a seasoned trader. Right.

When you have learned and studied the market. Right. And I got into that a lot more in the interview bootcamp for day traders as well. And we will be touching about a lot. We will be touching that in this course as well about how market moves and understanding market movements and patterns. Once you understand that. It’s not that difficult, right? It’s it’s just sticking to your plan, OK?

How to Day Trade – How Many Screens does it take

The fourth misconception. Screams I mean, how many times do we see traders have three twelve screens? I have one. I have one and I have two indicators. Right. And that’s actually brings me to number five. The majority of the times you see traders with so many screens, it’s usually because they are trading stocks. So they have several different stocks. I should actually say way more than several. Right.

They have a dozen different stocks, which has its own screen. You need to be able to focus on each one. And then all those blinking lights, the indicators, those trading softwares honestly puts me into analysis paralysis and I end up doing nothing.

How to Day Trade- What Software to use

You do not not need that many indicators or software, trade and trading software. Important thing to know if you are going to be looking into an academy. You should really have your red lights on. If somebody is selling you a software or is giving you an indicator that only lasts while you are with that academy.

Or you need to pay once you finish. Indicators are free. There are hundreds of indicators that are completely native and free. This should be one of the first things you should be looking at when you join an academy. If they are selling you an indicator or software, how to use the indicators that are already available.

That’s a totally different thing because that’s learning what trading is about. OK, so again, like I said, I use two indicators, but then I learn about patterns and those and movements. That’s free. It’s just watching the market.

So just remember, you do not need more. Too many screens. I have one screen, one screen sometimes at home. Usually, I stick to one screen and use two major indicators and that’s it. And it’s just watching the market.

The market, Mr. Market tells you so much. OK. 6. This is a big one. Research and news, OK. So depending on the market you are going into. Like I mentioned before, stocks, they require a lot, a lot of research. So you will be spending time learning about the different stocks and the research. That’s understandable in many other markets, like the future is you don’t need to do any research for X, you just need to understand what is happening with the two countries that you are focusing on in that particular pair.

How to Day Trade – Financial News

However, news news is another big one. OK, so for the most part, there are going to be really big news, you know, like the Treasury. It’s going to be talking interest rates, unemployment percentages.

Those are big news for day traders when they come out and it’s usually between nine thirty in the morning Eastern till 11:00 in the morning Eastern. That’s usually when the major news comes out. There is the FOMC, which is on Wednesdays and it’s in the afternoon. So you don’t trade during those times, right. You let the market just settle down. And you know that there are Web sites that you can find tells you exactly what’s going on. However, it’s the other news that you do not want to participate in, and that is the news that is CNBC.

That’s what they make all their money from. Jim Cramer, all these experts. Right. It’s just nonstop news that they’re babbling on, it’s not true. And completely speculative.

And there’s a saying we have especially for the stock market.

Buy on the rumor, which is a lot of what they do first and then sell on the news. Remember, they’re in it for themselves as well. So you want to stay away from news. You do not want to watch any. And then B sees you do not want to go into trading chat rooms and alert stock alert groups. You need to know the technicals.

You need to know what the market is doing and you need to focus on that. And that only even when there are the big news like unemployment, inventories, housing, whatever, the big news us who cares what was happening? Who cares?

You let it ride out and then you see. OK. That was a positive thing. That means the market is going up. So you focus on that negative. You focus on that. That’s as far as you need to worry about news. You do not need to give it any other weight.

And the last big one is being in and out of trades all day long. So before I became a trader, I thought that I needed to take 100 trades. I had to be in and out. Action, action, action. Right. Because this is what we’re seeing now that I have been doing this for a while. If I do one or two per day, that’s great, because the key and the secret and the magic is knowing when to not get into a trade.

Equally as knowing when to get into a trade. So once you understand that trading is actually a passive performance, it is definitely a performance activity, but it’s more passive. It’s kind of like a hunter. Right. I don’t condone hunting, but. One hunter will sit and they will wait for their prey. Right. And that’s would give it. That’s what to me is utterly amazing about them snipers.

You know, the patience, the discipline, they have to know when is the right time to strike. So if you want to think of it like that hunter or a sniper in your methodology of going for the good trade, they’re probably the best examples.

Again, I don’t condone them. I don’t think that they do the right thing, but that’s totally irrelevant. Right now, I’m just. Representing their activity, which is actually if you break it down, they’re quite amazing. You know, their patience, their discipline. It’s amazing. And if traders could bring that type of patients into their trading. They will definitely, definitely succeed.

So hopefully this will help you totally bust these ridiculous limiting beliefs and misconceptions so that you can clear yourself of that and start really focusing on what’s important.

How to Start Day Trading

If you want to learn more about my journey and how I started day trading you can read it here or you can watch on my YouTube channel.

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Day Trading Misconceptions and Myths