Day trading is a highly competitive, stressful, fast-paced activity. Only a relatively small number of traders are at the top of the pyramid and consistently succeed. What are the characteristics of these people?
The truth is that the top day traders have a lot of links in common with top artists, or elite athletes. That should not be too surprising. Many people tinkle the ivories, but not many can make a living as a professional pianist. Lots of us enjoy a game of tennis, but not many can earn a living on the pro circuit.
Obviously people who succeed in the arts and sport have a certain amount of talent for their profession profession, they have the passion to work long and hard to perfect their technique, they have the determination to succeed, the courage to keep going after setbacks, and the self discipline to maintain their technique under intense stress.
All these things are important, but there is another aspect I would like you to consider. Ask yourself how many concert pianists would say they stay at their peak without any practice between recitals? How many tennis pros would retain their top ranking if the only time they held a racquet was in tournament matches?
So, how many top class traders consistently succeed if the only trading they do is during trading trading sessions?
The professional artists or athlete practices or trains for hours each day. This is not something that stops once they reach the top. It is an ongoing part of their lifestyle for as long they remain professional participants.
So what is the equivalent of practicing your volley, getting in some putting practice, singing the scales, or any other form of honing your skills, for the professional day trader?
Well, what I find works well for me is this. At the end of each trading session I make screen shots of the daily chart in whatever time frame (s) I use to make my trading decisions. I save these in a folder for the particular contract. So, for example, I can now go back to the November 2007 Soybeans futures contract and look at the 1 minute, 2 minute and 5 minute charts for each trading day during the period when this was the "front contract". That is usually two to three months worth of charts for each contract.
I have been doing this for a long time, so I have literally thousands of charts to look at.
Most days I like to get in some "training" by pulling up charts for forty or fifty old trading days and going through each one applying my trading rules. After a while you can do this very quickly, as you spot your trading setups instantly.
This is important because when you are trading in a live session you do not have complete patterns to look at. Setups which are glaringly obvious when you are looking at a complete chart can be very difficult to spot when you are watching the charts forming on your screen in real time.
The benefit of the kind of training I am talking about is that the setup patterns become so deeply internalized in your mind that you can watch the bars being painted on your screen in a live session, and instinctively "see" what the next bar (s ) need to do to complete a setup.
When you reach this state, it is like being "in the zone" in any activity. Suddenly you seem to have more time. You are anticipating, not reacting. (Note that anticipating is not the same as predicting. All the training in the world will not enable you to predict the future, but you can learn to anticipate what movement is required to complete a setup pattern.)
Often a pattern is not completed. You get your orders in, having anticipated what is needed to complete the pattern, but then price moves in another direction. Now you can instantly see what is needed to complete a different setup. The initial orders are smoothly canceled, and new ones entered. This might happen a few times before one of the setups completes and you find yourself in a trade.
At that point, there is no hesitation. You swing automatically, instinctively, into your trade management routine. Your stop is entered, your target also if you use one. Stops are adjusted, profits are taken, all according to your trade management plan which you have practiced countless times during your out-of-market training sessions.
I know that one of the much vaunted benefits of day trading is that there is no need to work long hours. Most of the trades I take are over in less than fifteen minutes, so I could say I work for fifteen minutes a day. But ask yourself, does the elite 100 meters sprinter who averages one race each week of the year just work for ten seconds a week?
Of course not! And neither does a top class professional day trader just work for a few minutes a day. If you want to be successful, be prepared to put in the hard yards learning the routes, then be prepared to build a rigorous training schedule into your routine.
It is still the best job in the world, but be realistic about the commitment you need to put in to get to, and stay, at the top.