Day Trading: Do You Have What it Takes?

by David Jenyns on September 1, 2007

Day trading is not for the faint of heart. This high-pressure, fast-paced profession quickly chews up and spits out the weak and indecisive. To be a successful trader, one must possess several natural attributes, among them independence, confidence and vigor. The successful trader will command a room when he enters, and he will be able to sway others’ opinions with ease.

First and foremost, he must be absolutely self-reliant and self-determining. A dependent person, whose judgment hangs on the advice or passing words of others, will find himself swayed by a thousand outside influences. At critical points his judgment will be useless because he has not been able to exercise his ‘judgment muscles’ – they are weak from inactivity!

The professional day trader must be able to say: “The facts are in front of me; my analysis of the situation is this; therefore I will do this and this.”

Second, he must be familiar with the mechanics of the market, so that every little incident affecting prices will be given due weight. He should know the history of earnings of the stocks he is trading and financial condition of the companies in whose stock he is trading; the ways in which large operators accumulate and distribute stocks; the different kinds of markets (bull, bear, sideways, trending, etc.); be able to measure the effect of news and rumors; know when and in what stocks it is best to trade and measure the market forces behind them; know when to cut a loss (without fear or depression) and take a profit (without pride and puffery).

He must study the various swings and know where the market and the various stocks stand; he must recognize the inherent weakness or strength in prices; understand the basis or logic of movements. He should recognize the turning points of the market; see in his mind’s eye what is happening on the floor of the exchange.

He must have the nerve to stand a series of losses; persistence to keep him at the work or trading during adverse periods; self- control to avoid overtrading; an amiable and calm disposition to balance him at all times.

For perfect concentration as a protection from stock tips, gossip and other influences, which are rampant in a broker’s office, he should, if possible, seclude himself. A small room with a ticker (ed. note: a computer with real time data), a desk and private telephone connection with his broker’s office are all the facilities required. The work requires such delicate balance of the faculties that the slightest influence either way may throw the result against the trader.

You may say: “Nothing influences me,” but unconsciously it does affect your judgment to know that another man is bearish at a point where he thinks stocks should be bought. The mere thought, “He may be right,” has a deterrent influence upon you and clouds your own judgments; you hesitate and the opportunity is lost. No matter how the market goes from that point, you have missed a beat and your mental machinery is thrown out of gear.

There is an important point to take away here: Even if you do possess the skills and personality traits of a successful trader, it is all too easy to let your ego get in the way of good decision-making. If you can demonstrate these traits with grace and humility, always keeping in mind your own humanness, you will have a much better chance of success. It is the ego-maniac who never questions his own position who will find himself one day staring into the abyss of financial, and even personal, ruin

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