7 Steps To Daytrading

Day trading is not easy.  These 7 steps are not designed to give you a fool-proof, easy trading system that will always make you money.  If there were 7 such steps, day trading would be easy and we would all be millionaires.  Instead, use these steps to frame your own plan of attack and your own strategies because after all, YOU are the one with money on the table. 

1. Save money.  Before you can begin to trade at all, you must accumulate enough money to trade.  Have a financial cushion.  It's impossible to trade successfully with your last dollar.  When bankruptcy and insolvency are staring you in the face, the pressure to trade correctly is overwhelming. 

2. Get the right equipment. In order to trade competitively, you need a computer, a trading platform, and a solid connection to the internet.  As technology becomes more and more advanced, traders will need faster and better tools to keep up with traders in the pit and off floor professionals with state of the art computer technology. Tradestation and ETrade are both widely-used platforms.

3. Open a trading account.  In day trading the cheapest firm is not always the best.  Make sure that you are getting fast, fair executions.  The last thing you need as a distraction is a constant hassle with your broker. Try Interactive Brokers for stocks and Global Futures Exchange for futures.

4. Have a plan. Research day trading strategies and find out which style suits you the best.  Do you understand opening reversals? Momentum plays? Do you trade futures or stocks? Forex? Eminis?  Trading is a wide-open field, and there are about as many styles as there are people on this earth.

5. Back test your plan (quantify your results!).  You discovered a new trading system last week that would have given you 80% returns! Don't

automatically assume that every week will yield the same results.  By back testing your system, you will learn the actual track record of your trading

pattern, and this will give you an excellent place to gauge your real money results.  Your system has had 15% yearly returns over the past 5 years, and this year you are down 5%!  Is your system flawed? Has the market changed?  Are you even following the rules? Back testing gives you something to compare your results with, and it also proves that what you're doing has a track record that has worked.

6. Money management.  Money management encompasses a wide range of strategies, from diversifying your portfolio to trailing stops to knowing

the risk/reward ratio for your trade.  It is one thing to be able to read a chart and predict market moves, and it is quite another thing to make money

consistently year after year.  Most successful professional traders believe the money management is the most important factor in their success.  Without proper money management, the outlier disastrous trade can wipe out a market genius. 

7.  Confidence.  Work hard, then work harder.  Keep careful records of everything that you are doing.  At the end of every week, study every trade that you made.  Know what you did right and what you did wrong.  Build on your successes, eliminate the mistakes that you keep repeating.  By doing this you can build confidence in your trading abilities and your methods.  Gaining confidence will help you follow through with your trading plan.