A day trader is one who buys and sells securities like stocks or bonds within the same day (or trading session) to capitalize on the intraday price variations. Day trading takes place at a rapid pace because small, short-lived price changes are what day traders want to make the most out of. As a result of this hectic speed, mistakes often occur in day trading.
An overload of information, excess of parameters to keep track of, or something as simple as pressing the wrong button can cost you heavily. So, most of the expert day traders have a routine they follow to minimize the errors throughout the day. Now that you know what is a day trader, here are some guidelines for creating a schedule.
The Checklist for Day Traders
1. Decide Your Time Window
Depending on whether you trade full-time or part-time, the time you devote to trading will vary. Full-time professionals who are part of institutional brokerages trade throughout the trading hours and sometimes indulge in extended-hours trading too.
If you do it only part-time, the first thing you need to decide is your time window for trading. Usually, a two-hour span is what most traders set aside. If you want to be part of the peak market action, trade as soon as the market opens or just before it closes.
2. Maintain and Check an Economic Calendar
Stock prices often move unpredictably and in very short periods during major financial events. If you are a new trader or one who wants to avoid risks, it is best to avoid trading during these high-impact events. Economic calendars will keep you updated when you can expect such events (like the labor report issued by the US Bureau of Labor Statistics on the first Friday every month).
For company stocks, do not trade when the particular firm announces its quarterly returns or any other relevant financial announcement. Different markets have different calendars that give the most accurate information.
3. Assess the Financial News Before the Market Opens
Unless you are involved in extended-hour trading, your activities will start at around 9:30 AM local time in most countries. That gives you ample time to go through a financial newspaper or TV channel to note what to expect during the day. It is similar to an economic calendar but keeps you up-to-date about daily events or any surprises that happened overnight.
If you do take part in extended trading, these news items will keep you updated, but you no longer have to wait until the market opens to open or close a position.
4. Carefully Handle Automated Orders
Most professional traders use algorithmic trading and automation in their daily activities to execute large volumes of trade at high speed. However, you should also remember that the computer program is not going to check with you once you set the conditions for the deal.
If you set limits for stop-loss orders or some other parameters like moving average, double-check the values before loading the scripts. Similarly, when setting the default position size, ensure you set the value correctly and don’t miss out or add an extra digit. Selling or buying a tenth or ten times of what you planned could be disastrous.
Along the same lines, always check whether your data fed into your system are the live figures. If the numbers are lagging or the updating is slow, check if everyone faces the same issue and wait until it is fixed.
5. Write Notes to Yourself
Day traders often find themselves lost in an ocean of information. News, updates, market conditions, prices, and other numbers can overload you with too much information to remember. So, it is good practice to maintain a pocketbook or diary for noting down anything useful related to trading.
Writing down stuff that can help you later in the day enables you to keep track of your trading activities; you will not miss any important event or trade deal. Of course, you don’t have to maintain a physical notebook.
Most trading platforms today allow you to write notes and comments on the chart or data table itself. There are also features to send you alerts on the platform or your mobile based on your records.
6. Monitor Your Progress
No trader who made it big did so without making mistakes. One of the main reasons they became skilled traders is because they learned from their mistakes. That is why it is vital that you monitor your trading progress to keep improving by learning from the past continuously.
At the end of each day, note down the opportunities you missed, the best deals you made, and any other lesson you learned. If you trade on trading platforms, they might also generate weekly or monthly reports of your progress that you can analyze.
7. Keep Reading in Your Free Time
The trend seen in day trading is that the midday hours have minimal activity (low volume of trades being executed). In this “free time,” the best thing for you to do is catch up on your reading analyses.
Go through your notes and progress sheets to see how you can improve. Check the news or other websites or blogs to update yourself on the day’s economic events.
8. Know When to Quit
Lastly, you should know when you should call it a day, especially if you are a part-time trader. Since this is not your full-time profession, you should set a profit limit or loss limit, and if your winnings or losses cross those numbers, you stop trading. Forcing yourself to follow these guidelines will prevent you from gambling away money to recover your losses or chase higher profits.
Have You Prepared Your Routine?
Preparing an explicit routine using guidelines like those mentioned in this article keeps you focused on trading as a beginner. With practice, you internalize the habit and practice it subconsciously.
Apart from just maintaining a checklist, it is essential that you try out some strategies as well. Sign up for some free paper trading platforms online that let you practice stock trading with free stocks and virtual money.