So, You Want to Be a Day Trader? Read This.

09/11/2017 2:51 am EST

Focus: STRATEGIES

Jake Bernstein

Publisher, The Jake Bernstein Online Weekly Capital Markets Report and Analysis

Those who dream of day trading should read advice from Jake Bernstein, an internationally recognized futures analyst, trader and author of more than 41 books. It’s part of our new series of Trader Lessons from industry experts each Friday and available in our new weekly newsletter here.

Success as a day trader: it’s an American dream. It’s the crux of capitalism. It’s the pinnacle of peak performance in the financial world.

If you have an email account and if you’ve logged into any investment website, then you’re probably being bombarded daily by emails touting every investment scheme from forex to day trading.

It’s hard to know what to believe. Many claims are outrageous. Clearly, even the beginning investor will understand that if it’s too good to be true, then it’s probably not true.

However, some of the claims are plausible and real. After all, given the highly volatile market climate, it seems reasonable that one could take advantage of the numerous large intraday price swings in the capital markets.

Unfortunately, and all too frequently what appears to be obvious is obviously wrong.

This is not to say you can’t make money as a day trader. I must, however, exercise my due diligence and tell you that there are certain things you need to know before you jump into the swamp that has consumed so many new traders.

Only by knowing what you’re up against can you make an informed decision.

As the author of The Complete Day Trader (McGraw-Hill 1995) and The Complete Day Trader II (McGraw-Hill 1998) in addition to other books and articles about day trading, I understand the game. I have played it (and still do) thousands of times. And what I understand is the inherent difficulty of being a winner by the day and by the year.

Before you take the bait and believe that you can or will become a great day trader, please consider the following questions I’ve learned and answered over 50 years.

1. Do you have the time or patience to sit at your computer all day trading back and forth? If you have a real job, you don’t have the time.

2. You’ll be facing highly experienced traders powered by the latest computers and algorithms for taking advantage of the same moves that you’re trying to get. Would you go to the high-stakes poker room in Las Vegas as a beginner? If so, you will be cannon fodder!

3. What exactly is a day trade? Is it the day session? Is it the 23-hour market in forex? You have some decisions to make and what you decide is critical to your trading success as well as your health. I long ago decided that I love to sleep.

4. Do you have a strategy? Is it objective? Do you know what you’re doing? Are the rules clear? Have you back-tested them? Do you know if they are valid? Do you have a profit- maximizing strategy? If not, then your goose is cooked before you begin!

5. Do you know what markets you want to trade? Do you want to be all over the place? Can you trade six or seven different markets at the same time? Do you have the money to do it?

6. How has your discipline been tested? Do you get scared easily? Are you going to be like most traders--which means you will take small profits and large losses? How do you prepare yourself mentally and emotionally as well as financially?

7. Do you know how to place an order? If you do not understand order placement for your platform, you may make costly clerical errors. Believe me, they add up.

8. Do you plan to trade in your spare time, making day trades only when you have some time available? If there is a daily pattern or an intraday pattern that’s profitable, then you may miss those patterns unless you are there every day all day long.

9. Will you trade as a hobby or a business? If it’s a hobby, then I suggest you become a stamp collector or coin collector or get a model train set. Unless your day trading is a business, you’re doomed to failure

10. Do you think that you are successful because you were successful in a practice account without real money? Do you assume that this will translate into the real-world profits? I don’t think so. Do you think that living with someone before you get married is a real test of what happens after your wedding? If you don’t already know the answer, you have a rude awakening coming.

That’s my short list of caveats for you. Don’t get me wrong. I’m not trying to discourage you. I just want you to know the facts. I’m unbiased. I have no vested interest in getting you to trade or for that matter getting you to day trade. I will not make or lose anything based on your trading.

Think about this. You work hard for your money. Be an informed trader. Be a survivor. Learn to trade before you trade. It takes time. On-the-job training as a trader can be very costly.

Why begin your venture with the hardest game in the financial world.

Trade well and prosper.

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