Day trading for beginners, how do you decide when not to trade?
When day trading for beginners, there are actually three positions.
- You can go long, and this means that you’re betting on a market that is going up.
- You can go short and this means that you’re betting on a market that is going down, and yes, you can bet on a falling market.
- And the third position that you can have is no position. Especially when you’re new to trading.
I see this all the time. Somebody attends one of my Bootcamps or Advanced Trainings and says, “OK, I got it and I really want to trade.” And I can totally relate. Trading is exciting.
I mean, in the very beginning of my trading career I had this little voice in my head that said, ‘If you don’t trade, you don’t make any money.’ And this is when I realized, well, if I don’t trade, I also don’t lose any money.
It’s very important that you’re picky with your trades.
Let me give you an example.
Let’s say that you’re in the mood for ice cream and you walk to the 7-Eleven at the corner. And you tell the clerk, you know what I’m in the mood for some chocolate ice cream, and the guy says: “Sorry. All we have is vanilla or strawberry.”
What do you do? And this is where some people might say, you know what? Vanilla is good enough.
If you only have a few choices, you might compromise.
Now, on the other hand, think about this.
If you want to have chocolate ice cream and you walk into Baskin Robbins… How many flavors do they have? 32? An insane amount, right?
So you walk in and say, you know what? I want to have some chocolate ice cream. And the guy behind the counter says, “Well, sure. No problem! Would you like Belgian chocolate, milk chocolate, dark chocolate? Would you like chocolate chip chunks in there?”
Or one of my favorites: Rocky Road! You know Rocky Road? It’s so good. It has chocolate swirls and marshmallows…
Anyhow. Now you can pick the very, very best one.
And this is why I personally like to get my trades from my software.
The PowerX Analyzer gives me 2-8 trades every day. And then I pick the very best one.
Now today, the software suggested 6 trades to me. But because I’m really, really picky, and honestly, I didn’t like any of these picks, I decided not to trade this morning.
And you see, this is really important to realize if you’re new to trading.
Trading is a marathon, not a sprint. You don’t have to take a trade every day.
The most important thing is that you…
Have rules for yourself that define what trades you’re taking.
For me, in addition to having certain performance numbers that I want to see, I will not take a trade if I don’t have the opportunity to make at least 60% per year. And often, I’m looking for trades where I can make 80 to 90 percent a year.
I also want to take trades where for every dollar that I lose, I can make $3, right? This is some of my criteria that I like to look for, and the PowerX Anaylzer software shows me the trades that meet my criteria.
In addition, there are two other criteria I’m looking for.
- I want to make sure that the stock is nicely trending, and I call this “trendability”
- I want to make sure that this stock is not “gappy” – that it doesn’t have a lot of gaps.
If you’d like to learn more about this go to http://www.mytradingroutine.com. There’s a 35-minute video that shows you exactly how I do this.
Recap: Day Trading for Beginners
When not to trade
Make sure that you’re picky. Don’t compromise when it comes to trading. You can compromise when it comes to ice cream, but trust me, when it comes to trading, when you compromise, this is when you usually take a trade that is not as good as you want it to be. And that is usually the losing trade.
Keep in mind that there’s always three positions. Going long – betting on a rising market, going short – betting on a falling market, and not being in a position. It’s a conscious choice, just like I made the choice of not taking any trades yesterday and today. Now, I’ve been trading for a long time, so I don’t have the itch that I have to trade.
Does this help you in your trading? If so, make sure that you leave a comment below.
Read Next: What It Takes to be a Successful Trader