Finance

by Dr. Barry Burns

Day trading can be a thrilling way to make money. But it’s more challening than most beginners think. Here are some day trading tips that can help the new trader as well as the more advanced trader to achieve your goals faster.

First: Be careful not to over trade. The majority of the time the market is a random walk - meaning that it’s moving without any rhyme or reason. Amateur traders taking small positions in the market are behind these unpredictable movements.

The amateurs don’t affect the market in any significant manner. The pros, with their big positions and their commitment to hold trades for longer periods of time, create longer term moves that can provide large profits.

Some people are attracted to day trading for of the excitement of the business and the potential for fast money. This attitude sets one up for disappointment. Day trading does not have the energy of a video game. Professional day traders stay on the sidelines for waiting for a high-probability trade to set up. They trade less frequently than the amateurs believe.

Second: The common axiom “The trend is your friend” is a half-truth.

The trend is a fair weather friend!

It is your friend early on. But trends get “tired” and eventually end. So the full axiom is actually, “The trend is your friend, until the end.”

There are 2 times to trade when you can put stats on your side:

When a new trend is just starting.

When a trend is getting “tired.”

Trading at these two times lets you put the “edge” of the bell curve on your side. Trading mid-trend, puts you in the middle of the bell curve where the outcome is completely unpredictable.

Third: Listen to free chat rooms for day trading tips and do exactly the opposite!

The biggest benefit usually doesn’t come from listening to the room leader. It often comes observing the chatter of the participants while they comment on what trades they are getting into.

As you may guess, the majority of the time they are completely misguided in their approach.

They expose the collective thinking of the unprofitable amateurs. It’s scarey to notice how the amateurs all reason alike when it comes to day trading. If you watch them in the rooms for several months you’ll begin to identify clear patterns of things they do wrong over and over again. Do the opposite and profit.

One of the most common things I’ve noticed traders do in these chat rooms is trading against the trend. It’s almost a mantra as they say: “The market can’t go any higher.” “The market has to turn around here.” “This market is way over-extended.”

It is absolutely amazing to see how amateurs habitually trade against the trend in an effort to find tops and bottoms. They are constantly looking for the market to turn around. As is always the case, you can profit tremendously by taking the other side of their trades.

Day trading can be extremely rewarding, but to be successful you must stand aside from the masses and avoid the herd instinct that drives so many. These 3 day trading tips can help you be among the minority who succeeds.

About the Author:

Dr. Barry Burns is the president of Top Dog Trading, writes a day trading blog and offers a free 5-day video course which provides day trading tips. He has spoken at DayTradersUSA, “Elite Masters of Trading,” and Traders Expos.