Day traders face various challenges in their journey
to a profitable day. One of the most fundamentally
difficult parts of trading is risk management and
holding onto your winning trades. Even more
difficult is to take home profits at the end of the
day, especially on a day when one
trade converts all profits to losses.
Waiting for setups and strategies to work may
seem very complicated at a beginner level.
But eventually, all traders will find their edge.
To create a strategy and make a profitable
precursor to make money is pretty much through
the textbook method. However, to keep calm
and make profits and hold it till the day end
is quite challenging.
The trader starts off with a scary first trade
and even ends up making a profit, the same
goes on for another three or four trades and each
time there is a profit, the trader takes another in
the hope of literally stealing while the hay shines.
However, soon the markets reverse and all his
positions turn red. Now, this is where psychology
comes into play and one must decide whether
they want to give up the day’s profit or just take
stop loss and close for the day. On the contrary,
people with low-risk management skills will try to
still make money out of a losing trade by wrongfully
averaging at bad prices. While the averaging leads
to even deeper losses, something other than this
can also harm the portfolio or positions of the day.
Many traders will end up giving the entire day’s
profit with the hope that the market will definitely
reverse in their direction. At the end of the day,
the market follows the trend and the trader
loses all that they made and gives away more
from their bank account.
Such is a typical day for a loss-making trader.
Now, let us find ways in which these days don't
appear in a calendar year or in any trading career.
Everyone dreads these times, but when they come,
they do teach a lot in a short span of time.
SET A TARGET AT THE BEGINNING OF THE SESSION
Traders with a limited outlook on the “profit” and “loss”
for the day, tend to perform better than those who work
on the strength of luck and emotions. It is important to
exit trades either at a loss or profit as soon as there is a
clear indication of the targets being met. A set target in
mind really helps in avoiding both greed and ignorance
at the same time. Some traders lose their profit due to
not being able to book profits in time. Some types of
traders actually lose because they don’t have the
understanding of a safe exit with small losses.
Once a trader decides that they are not going to
give money to the market beyond a certain amount,
then it becomes much easy and simpler. One can
simply exit the trade and not hold for the sake of
hope and belief. Markets are a game of probability
and keeping one constant as the Profit and loss
margin can really be very helpful.
It is essential to note that profit and loss sometimes
can be difficult to track and maintain throughout the
day. As a thumb rule, a trader can simply put stop
losses on the number of points they are willing to
risk per trade, In case of an absence of clear levels
and price indication of a high probable setup, a trader
may simply avoid trading. This will help in reducing the
number of trades. Only quality trades with good setups
will result in better-than-average results from the market.
AVOID EARLY ENTRIES & EXITS
False breakouts and breakdowns seem to take away
a significant percentage of profits from a successful trader.
It is wise to always start with your levels and wait for the
return of those price marks. The first attempt to break any
level could just be a sly act of liquidity run and it may not
lead to any significant profits. Consolidations at the stage
of important levels are quite helpful in riding a comfortable
longer trend. Once early entries and exits are avoided
it is only about giving time to your risk management
techniques and position sizing. So, simply wait for
retesting of your levels and see the game change
in your favor.
LOG TRADES ON PAPER
A lot of times overtrading happens due to the fact that
one cannot hold back from the trading terminal. If you
keep your hands off the table, there is a lesser chance
of giving up your booked profits. When you carry a
trading journal with you onto the trading desk, life becomes
easy. Traders can simply log down each and every reason
for their trading and rationalize the process of analyzing the
markets. Rather than going with the betting spree of taking
trades literally on every candle; a trader becomes more alert
to the volatility and market conditions. Using the market
moves to your might is one of the most crucial aspects of
trading. This takes experiences and deep drawdown phases.
If a trader cannot hold back to the profits, then the equity
curve will never face north. Smart traders will prevent
themselves from overtrading through a meticulous
post-mortem of their trades the previous day. Once
the issue of overtrade is solved, profits will knock
on the door to be welcomed.
Simple errors in the market can be improved upon and eliminated by following a trading journal.
DEPLOY LOW-RISK STRATEGIES
For the subsequent trades beyond a threshold of the
number of trades control your greed with strict stop losses.
Learn to place stop losses correctly. Always utilize the
knowledge you derive from your losses. Take efforts to
backtest the strategies, and create the edge that has
been elusive so far. There is no better way of looking at
the markets than through the lens of an analyst. Find
strategies that have a high reward ratio to your favor.
This way, markets will eventually reward you, even for
being right a few times. Not all your analysis and trades
may go right all the time. The idea is to have higher profits
on the trades that you are right about. And give away small
losses only when you are wrong.
UNINSTALL TRADING APPS
On a day when it is just very difficult to hold yourself back.
One can play a little with their brain. Make it difficult to
actually initiate a new trade, despite having sufficient capital
in the trading margin-requirements. The easiest way to do this
is by uninstalling mobile apps that one may use to take trades.
Another way would be to keep a strong password for re-entering
the terminal. Sometimes one can just feel discouraged enough to
type in the long password to log back on. This way one reduces
and sort of kills the enthusiasm to take seemingly lucrative trades.
Overtrading is not so difficult to control, but one needs to put up
the right barriers to make it difficult to even execute a new trade.
Check out this stock market secret
A sweeter alternative is provided by some brokers, to make
a trader stop overtrading. This is often known as the kill switch.
The kill switch literally removes access to the app for the day
and thereby helps a trader in securing at least the day’s profit.
TAKE BREAKS. STEP OUT
In case of a big loss or profit, it is imperative that the brain
will want to go back to the same adrenaline trip. In order to
avoid such pulsating cravings to sit in front of the terminal and trade,
one must find ways to distance themselves from the market.
This can be done through simple habits like rewarding yourself
with a good dinner or a dessert. The act of going out and being in
a different environment will help in detaching emotions from the
Day’s profit and loss sheet. Thus, keeping the mind, body, and
soul involved in a different euphoria altogether.
CONCLUSION
To conclude, it should be said that no two traders may be
the same and it is only up to an individual how they choose
to keep their calm and steal from the market. The steps in
this article are the most commonly followed ones, and it has
mostly yielded successful traders. If one finds any value in
the same, they are urged to follow it daily, to see good results.
If there are some other actionable plans, one should try and
execute that as well. It is important to understand that a trader
cannot make money every day, but on the days on which they
warn, some should be taken home for sure at the end of the day.
Keep this philosophy and good luck with your trading career.
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