By definition I would be a day trader. Why? Because I trade online regularly, make the trades myself and trade at least one stock per day.
I have a great respect for day traders. Day traders are the real juice in the markets because there are thousands of us willing to play the game every day. One institution buying a million shares does little to affect the market, compared with 25 day traders each buying 40,000 shares. It’s the smaller trades that add liquidity to the markets every day. So yes, long live the day trader.
But I do need to be honest and make a few day trader confessions:
1 – Sometimes I trade too often, and spend too much on commissions. Guilty!
2 – Sometimes I buy stocks on rumour and then get stuck holding the bag. Guilty!
3 – Sometimes I hold on to a stock for far too long to avoid a loss. Guilty!
Honest Day Trader Confessions do have an upside. As I write them down and review them daily, I am far less likely to keep repeating the same mistakes. At least that’s the hope.
Day traders can live in isolation and that’s a huge mistake. I don’t advocate you jump into all the message boards either. There are some real dangers lurking there for the unsuspecting. What I am talking about is learning a few tricks that will turn around your day trader skills.
1 – Learn how to follow the money. Meaning, go where the action and heavily traded stocks are. These are liquid, easy to enter and exit stocks. Watching the trading patterns with Level 2 will allow you to pick very good entry positions.
2 – Learn to buy the news. You heard right! Good news brings volume to a stock and volume allows you to be a part of the action. Example: Evolving Gold Corp EVG.V a junior Canadian mining company traded 15 million shares on Tuesday July 14, 2009. The good news allowed the stock to trade between .58 and .95 in a single day. So buying into the news smartly, can be highly profitable.
3 – Learn to take a loss. Hanging on to a bad stock for too long means dead money. Better to lose a few hundred dollars today and make it back in a few days than wait six months and potentially lose thousands more. Remember, every day your money is sitting still, is another day of lost opportunities. Read that again!
So after you make your own day trader confessions where do you go. I can tell you what I did. I went to the Stock Research Portal. It’s a free site that focuses on the mining, oil and gas sectors. Sectors that I personally follow all the time.