Core Traits of Winning Daytraders

03/22/2011 1:00 pm EST

Focus: STRATEGIES

Anne-Marie Baiynd

President and CEO, TheTradingBook.com

Daytrading requires a skill set quite different than that of an everyday investor. Anne-Marie Baiynd, author and daytrader, discusses the differences and key lessons designed to help new traders find their way in the world of daytrading.
 
My guest today is Anne-Marie Baiynd, and we're talking about the differences between daytraders and investors, and Anne-Marie, what are some of the differences?

Well, I am mostly a daytrader, so if I think about investors, I think about folks that really focus on the fundamental aspect of a stock. How well is it doing, what kind of management it has in place, and the longer term trends of what's happening with the stock. A daytrader, though it's important to look at longer-term trends, must really focus on very short-term elements in the market. I believe that daytraders work much more efficiently if they're very, very technically oriented. An investor really doesn't have to be very technically oriented. They have to have understanding of good management and that sort of thing. As a daytrader, really you don't even think about things that an investor does. Also, an investor can buy something, know that they're buying to hold, and it can fall quite a bit and they're willing to absorb the loss because they know in the long run, they're going to end upon the topside. A daytrader, not so much, you can't begin at the beginning of the day and say OK, I'm going long and when it's fallen six dollars when you have to close at the end of the day, doesn't really work for the P&L, it's not good.

So what goes into the decision-making process for a daytrader?

Well, it depends on what kind of daytrader you are and which technicals you use. That's a very broad question, but in general, a successful daytrader knows how to make swift decisions, and a successful daytrader knows how to manage their risk. You can't take a trade 95 cents from your stop with thinking that you're only going to get twenty-five cents on the trade.  

That's bad risk:reward ratio.

Exactly, and so from a daytrading perspective, you know it's simple when we think about it, but when we're in the fray we don't think about things because everything is moving and it's so dynamic. We lose sight of very important anchors that we need to look at as daytraders, and sometimes we do take those bad trades and say, "Alright, well my risk-to-reward is absolutely terrible here but I'm jumping in anyway." The daytrader really has to have a very, very good sense of discipline and be patient. In a very strange way, even though things are moving very quickly, you have to wait for the price to come to you; you do not chase.

What got you into daytrading, and what type of daytrader are you?

What got me into day trading, I spent many years in the recruiting business, and I was absolutely burned out really, hundred-hour weeks and I just wanted to do something different. I had never used my mathematics that I have my degrees in, and I saw a presentation for technical trading and I said "Alright, I think that that sounds fun," and I made enough good life choice decisions that I could say time to change and I could. I just started really full time from day one, which is a tragic thing when you go in and there's no barriers to entry in trading, right. All you have to have is money and an account.

Was it an expensive lesson?

Words can not describe, yeah, very, very expensive. The market will teach you lessons, and it will take your money one way or the other to teach you what it is that you need to know. That's just a fact. So either you get educated a little bit and stand on some solid ground, or you go in there thinking that you can do it and the market will take your money to teach you the lessons.

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