At the time of writing this, my daytrading journey is around ten months in and it’s been a learning process all the way. From the good to the bad there are a lot of things I wish I knew before I started.
Now that we are several months in, I want to share my experience and help those that may need it in the future.
Most of the tips listed below could be used in any market condition. These are not actual trading picks. These are tips that will potentially save you money and help make you money as well.
Below are the Top 21 Tips I want to share with you from what I learned daytrading in 2020. With one of the craziest markets ever, there was a lot to take in.
- Broker Choice is Critical
- All brokers are not created equal. Depending on what style of trading you decide to trade, the broker you choose will matter. Although costs are important, execution speed and platform uptime are the things you need to be worried about.
- I started with TD Ameritrade using Think or Swim and eventually moved over to Tradestation. Depending on where you are in the world, be sure to choose the platform that meets your trading criteria.
- You can read my reviews of the brokers listed above on this site.
- Level 2 Is Extremely Important
- A tool I didn’t really understand when I traded in the past is Level 2. It is also known as market depth. There is a cost to this data, but it tells you the story of the price action. Once you start to learn how to use it, you won’t trade without it.
- You need to make sure you get market data that gives you all the books. This means you get the full depth. This will show where big buyers and sellers exist when it comes to your entry.
- Without this data, you could be entering trades not knowing you are about to go up against a wall and get pushed back real fast.
- Note – Think or Swim has Market depth, but it doesn’t give you all the information you need. Also, put the time in when it comes to learning to read the tape.
- Don’t Listen to the Twitter People
There are so many people from social media to TV trying to show you how to trade. One of the biggest platforms for new and existing traders to follow is through Twitter. Everyone is a genius when the market goes straight up. Do your due diligence on who you follow on Twitter. Remember, in the end, it’s up to you when it comes to finding your way.- The good thing I’ve found out about Twitter is how to use Tweetdeck. Although it takes up screen space, having this open allows me to quickly put in a symbol and see if there is news, if it is getting pumped, or anything else to help me make a trading decision.
- People Will Try To Sell You Anything
- Just like Twitter and other platforms, be aware of all the people trying to sell you something. Most likely a course on how to make 1000’s of dollars in your first month. You’ll see all kinds of sleazy sales type people pushing fluff making it seem like the holy grail.
- I was lucky to find an amazing trader that has really shown me how to do it. It’s up to you to find someone to lean on and help you on your journey. Avoid the crap.
- Also, like above, tune out the noise. All the different channels turn out to be distractions.
- It Takes A Lot of Effort
- Can you just open a laptop and start trading? Sure you can. This won’t get you very far in the daytrading world. You really need to find a process that works for you and then put it to practice. Take trades. Test your strategies. Watch your game tape just like professional athletes before they face an opponent.
- There are so many more people smarter than us that we are up against each day. One candlestick may give you an idea, but you really need to dive in and learn why.
- Time is the one thing that will cost you the most.
- Don’t Give Up On Yourself
- If you accepted the tip before this, you’ll be on your way to pulling money out of the market. There will be tons of times where you are struggling, taking dumb trades, and breaking all of the rules. These are the moments you will learn from.
- Don’t give up since you had a bad day, week, or month. It will happen. From all the traders I talk to, I hear the same thing over and over. Don’t stop believing in yourself no matter what you are doing in life.
- Find People to Talk to During the Day
Although the news and movies can make daytrading seem like this exciting place, the truth of that matter is, it can be the most boring job at times. There are moments where you need to be so disciplined and do nothing.- To make the day a little less lonely, try to find either someone to talk to, a room to join, or any other means of connecting with others. It really helps to discuss your trades, while also creating a social atmosphere during the slow times.
- Manage Your Risk on Every Trade
- The most important thing mentioned about trading is managing your risk. However, I’ve learned the real reason why people stay in the trading game. They get out of a losing trade no questions asked. They don’t let ego get in the way.
- If you want to be the bagholder in a trade so be it, but you will not last long.
- If my theory doesn’t work within a few moments, I will close the trade immediately with a loss.
- I’ll take 10 minor losses over 1 major loss any day.
- Don’t Just Throw Darts
Once you’ve worked on a strategy, it’s time to fine-tune it. You may think certain stocks are in play because a stock is showing you a setup, but is that stock really in play.- Sometimes the trade will work, but a stock with news or above-average price action is a way better trade than some stock that is just moving up.
- Practice Trades in Real-Time
- Paper trading has a lot of different meanings, but to be honest it really doesn’t prove anything in real life. Once you start trading with real money things will be much different. You are better off trading with $50 than trading with pen and paper.
- Several brokers offer real-time trading simulators that get you close to the action. Think or Swim, Tradestation, and Interactive Brokers give you a simulator if you have an account. Do what you can to learn the platform, but once that is done start pressing the buy button with real money.
- Record All of Your Trades and ReWatch Them
- If you take a trade, write down what you did from entry to exit. There is a lot you can learn just by writing down the reasons for the trade you won or lost on.
- Record your trades. Not just one or two, but every trade you take throughout the day. The only negative to recording a trade is a slight slow down on your computer.
- You will get so much valuable information out of your recordings. You can see what happened at entry, why you sold too soon, why you didn’t get out fast enough and so much more. This is the TIP that may be #1.
- You can get all different kinds of software to record your trades. I use TechSmith Camtasia studio. You can use Snagit which is a lighter version and much less expensive.
- You Don’t Need Fancy Scanners
- Yes, software like Trade-Ideas, Scanz, and other sites offer some really cool tools for finding stocks to trade. Do they really give you the advantage you seek? I haven’t purchased any scanners yet and don’t plan to until I’m more profitable.
- By using Tradestation, I can set up several scans for free. It’s not as cool as Trade-Ideas, but I find some nice trade ideas throughout the day. It took me a while to figure it out, but I’m confident in using it going forward.
- Most brokers will offer you some kind of scanner. Try to take advantage of it without having to spend money.
- Have Conviction In Your Trades
- Something I’m still working on everyday. I need to trust myself with everything I do. Whether it works or not, if it meets my parameters, take the trade.
- You, Will, Have Losing Trades
- If you can get comfortable with a losing trade you will be way better off. No one likes to lose, but small losses are part of the trading game. Take that small loss and don’t let it become a big loser.
- This is one of the top three things when it comes to being successful. TAKE THE LOSS and MOVE ON.
- You, Will, have Losing Days
- Something we all hate, THE RED DAY. This is part of trading, so you need to own up to these and learn from your mistakes. Go over your trades and see what you shouldn’t or should’ve done.
- The key to red days is to not only keep them small but don’t go down a spiral or start tilting trying to make back your losses.
- After a red day, consider going smaller size to get your feet wet the next day.
- Get Setup For Speed
From the fastest Internet connection to the fastet PC you can afford, you want to make sure you have the best. I switched early on when I noticed a slow down at peak times. The PC I upgraded to is better, but still isn’t where I want to be.- I have some PC’s in mind, but they average around $3000. This is a lot more than I want to spend on a new computer. Update – I built my own trading PC.
- Trust Your Instincts
- When in doubt, trust your instincts. Either don’t take the trade, get out of the trade, or just sit on your hands. You have to trust yourself and be comfortable with the decision no matter what the outcome is.
- I’ve been in several trades I got out of just in time and I’ve gotten out of trades where I shouldn’t have gotten out. Feel good with your decision no matter the outcome.
- Don’t Let FOMO Be a Problem
- This was probably the theory of 2020. Once we bottomed out in March there were tons of new traders jumping in looking for the big move back up. Well, those that made this decision did very well. This caused 1000’s of traders to chase more big moves.
- Intraday wise the same thing happens. You see a $5 stock trading at $11 at the open and you realized you missed the move. Don’t worry about these. You will find other trades that setup. Jumping into a FOMO trade will cost you.
- Don’t Hold and Hope
- I spoke about this earlier in the don’t be afraid to take a loss tip. If you see a trade not working, get out. There is nothing to it. Just exit the trade with the loss at that time. If you hold, yes it may come back, but at the same time, we’ve all seen trades keep going against, further, and further. Is it worth it? Ask that question to yourself and I’m sure most of the time you will be glad you didn’t hold on to a trade that was failing.
- Use Limits For Entry and Try Not to Set Hard Stops
- If you can avoid market orders on the entry or Exit you will save yourself some money. If you are trading high speed, peak hours, market makers will give you a poor fill almost every time. If you have to set a limit above the entry you will know exactly how much you could spend.
- You can also use a buy stop limit on quote orders. I have a hard time getting filled on some trades if I’m too tight, but if I pressed a market order I can see myself underwater on my entry.
- If you need a hard stop then use one. Market makers are notorious for the sell top runs or buy stop runs. If you are willing to wiggle a little and hang in there, you’d be surprised how many times the price does turnaround.
- Scaling Out of Trades
Commission-free trading has really changed the exiting model. Sure, if you are trading 1000’s of shares at a time, a few bucks may not really matter, but if you are trading small, free commissions are important. You can get in with 1000 shares and scale-out 100 shares at a time and it won’t cost you any more. This will allow you to go after the bigger move.- There are times if you have an extra 100 shares by the end of the day, you could see another $100 – $1000 in your trade should you hold onto it. Scaling out gives you so many more options for bigger gains.
BONUS TIPS
- Tracking Your Trades
This tip was meant to be part of the Record all of your trades tip. This should be in your top five for sure. This is the moment where you need to put in the effort post-market. Track everything you do from entry to exit. By writing down what you did and why you did it may help you find some flaws that can be removed from your trading in the future. - Taking notes on each trade will give you the information to making better decisions. Holding some longer, Selling more sooner.
- Add as much information as possible to your tracker. Don’t leave out the little things.
- Step Away During Lunch
- Trades will occur anytime throughout the day, but lunchtime is a tough time for trading. You will find yourself getting chopped around if you trade during lunch. I suggest you walk away during the lunch period and regroup. Come back for the last 2 hours and wait for things to pick up.
- Take Some Gains Out
- If you get to the point where you are making money, take some out and show yourself some profits. Depending on your account size, find a threshold level that works for you. I currently take out $1k every time I hit that number. If my account takes a hit, I will wait until I pull it back up to take money out.
- Keep a Group of Stocks You Like to Trade on Your Watchlist
- Over time you will watch a lot of the same stocks trade day in and day out. You know I like to watch TSLA, BYND, and BA. I kind of have a feeling of how they trade. This gives me an edge at times when I’m thinking about entering or exiting a trade.
- Tomorrow is Another Day
- Remember, tomorrow is another day. Should you have a good or bad day, you can come back the next and keep fighting. When you are about to do something that isn’t part of your playbook, tell yourself, tomorrow is another trading day. This is the best way a trader can regroup.
- Use Hotkeys
- I decided to use hotkeys after about 8 months of trading. I even started to use the Elgato Stream Deck for day trading. This tool has been great for fast executions.
This covers some tips I wish I had under my belt when I started. Daytrading is a long process to get good at. I’ve found some success over the year, but I’m very far from where I want to be. I hope these Daytrading tips can help you become a better trader. If you have some things that you swear by, don’t be afraid to let me know what helped. I know I mentioned my top 21 Daytrading tips, but to be honest, I could probably run it up to 100 next time. Good luck with all your trading going forward.
