Five Things You Absolutely Need To Know To Become A Successful Day Trader

[lrushing]

Most people feel the lure of day trading: seeing the frenzy on the floor of the New York Stock Exchange, grabbing onto the tail of a skyrocketing stock, and earning your millions. They want to start day trading and find the answer to that famous quote from the movie Wall Street: "How many yachts can you water-ski behind?"

Unfortunately, the vast majority of these beginner traders want to see results faster than it takes to watch the movie. In fact, about 90% of beginner day traders are knocked out of the game within the first few months.

The good news is that this fact can easily be addressed. Just about all of those who crashed and burned did so because they didn't have a plan. If you take the time to develop a plan and learn how to trade, you stand a much better chance of making that top 10% of day traders who go on to successful day trading careers.

Here are five things you need to know before you start day trading:

1. Is Day Trading Right For You? - This seems like a basic question, but you should seriously evaluate your trading personality. Will risking that much money make you nervous? Can you afford to lose money in the stock market? Are you financially - and emotionally - prepared to leave your job and co-workers behind you? These and other questions must be answered before you go any further in planning your day trading career.

2. How to Control Your Emotions - What most beginner day traders don't realize is that trading psychology has a huge impact on your success - and the market likes to play with your mind! There are many different emotions that come into play, but it boils down to two main dangers: fear and greed. It is vitally important you learn how to control your emotions before you try to tackle the market.

3. How to Develop a Solid Trading Plan - If you fail to plan, you plan to fail. And yes, it really is that simple. A solid trading plan will include details like determining what type of trader you are, your trading strategies (see below), what products (stocks, e-minis, etc.) you will trade, what software you will use, even your entry points, exit points, and stop loss points. The more detailed your plan, the more likely you are to have day trading success.

4. What Kind of Trading Strategies You Will Use - There are many trading strategies that will help you succeed at day trading. As a beginner trader you will probably be best served learning one or two to start with. For example, the Bull Trap is an easy type of momentum play for beginners to learn that allows you to predict a trend reversal, and cash in by following the momentum. But there are many different trading strategies; the key is finding the right set of strategies for you.

5. How to Develop a Business Plan - You should approach day trading as a business, not a hobby. Even if you plan to trade just part time, make sure you develop a full business plan that covers all the financial basics like how much trading capital you have, what your short-term and long-term financial goals are, developing cash flow statements, etc. You should also decide how you will work: where your office will be, what time you will be in your office in the morning, what daily preparation you will need, etc.

Learning these five things won't guarantee that you will become a successful day trader. But if you start day trading before you find out these answers, you most certainly won't get too far.