Keys to Successful Day Trading
By Toni Hansen and Brandon Fredrickson
The market is an ever-changing entity,
presenting us every day with different and unique scenarios. Nevertheless, the market is more or less a reflection
of people's ideas and attitudes and while it is also true that no two people
are alike, each and every one of us has something in common with someone
else, whether it be the way we get out of bed in the morning or the foods
we prefer to eat. Additionally, we tend to repeat actions such as preferring
to brush our teeth at a certain time of day or making sure we try to catch
the Thursday night prime time television shows. No matter which angle you
look at it from, humans are creatures of habit and this tendency gets reflected
in stock movement. It's what makes technical analysis a reliable and profitable
way to trade.
Unfortunately, technical analysis
is not always cut and dry. The same core pattern does not work the
same in every market environment. For instance, one of the setups I often
look for on a daily chart is a 3-5 day pullback in an up trending stock
for buying opportunities. Where newer traders tend to get in trouble, however,
is taking such a setup to mean that every time an up trending stock pulls
back 3-5 days and then breaks the previous day's highs that means
they enter long. In reality, there are always exceptions and it's learning
what these are that can be the dividing line between those traders who
are successful and those who fail. In this example, how a stocks pulls
back in a primary uptrend as well as overall market conditions will greatly
influence whether taking such a pullback as a long is really worth the
risk to reward. In some cases it is not.
The ability to adjust to changing
market circumstances is just one of the traits of a successful trader.
In truth though, there are quite a few. Something that I've found helpful
is taking the time to look at other successful traders and trying to identify
characteristics that may have contributed to their success. In addition
to being able to adapt there are about 8 more things I have observed which
include the following:
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