To become a day trader, you need to have certain qualities. In day trading, positions are opened and closed within the same day. This helps define the type of personality that tends to be drawn to day trading.
- You don’t mind being at your computer the whole day, or if you’re part time, for the time you have allocated to trade. If you have a demanding job, or a lot of family or other commitments, day trading may not be a good fit for you.
- You want/need to keep an eye on the trade and monitor it whilst it’s open. Because a day trader opens and closes positions in the same day, they aren’t going to be affected by things that are happening whilst the market is closed, or they are asleep, or involved in social activities.
- Day traders are in many ways more impatient than other traders, though they do need to have some patience to be successful. A good day trader needs to be patient enough to wait for a trade to come along that fits their strategy. They need enough self-control that trades aren’t entered out of boredom, or the need to ‘do’ something – even if it means waiting for hours.
- Day traders tend to feel the need to be doing something all the time, hence they don’t mind watching the stock market for a good trade whilst that session is open. Those that compulsively micro-manage things might be drawn to day trading.
A good day trader needs the ability to take decisive action when conditions are identified that meet their trading criteria. This is partly related to confidence in your own judgment, as well as how you handle a sense of risk psychologically. Leaving it too long to enter a trade by waiting until a stock moves into profit can mean the window of entry that would make it a good (profitable) trade, is missed. This is a mistake that beginners can make, and could be a function of needing to learn more, or simply a lack of experience leading to a lack of confidence. Certainly, if you prefer someone to take you by the hand, joining a service that recommends stocks might be a good idea.
The flip side to the above is about not making rash decisions. A good day trader does not approach trading like a gambler would. Day traders mostly use technical analysis, which follows price movements in the stock market, to determine whether to make a trade. Most people who become a day trader are risk averse, so this may not be a problem. Day traders tend to use small stop losses to limit the possible amount lost per trade.