Good trading habits

  1. Don’t trade with emotions
    • It sounds simple enough but I will have to say it is very tough rule to follow, even after trading for a few years.  This can cause you to make a bad trading decision when entering or exiting a trade.
  2. Don’t be greedy
    • Everyone wants to sell something for maximum profit. With this mentality, you can turn a winning trade into a losing trade. Small gains will add up over time trust me.  You don’t always have to hit a home run on every trade
  3. Have a plan
    • This applies to both buying and selling a stock.  It is a good practice to have an entry price and especially an exit price to limit your downside if the trade goes against you.  You can set stop losses that will automatically be triggered if the price falls below a certain price or you can manually sell the stock after it has reached threshold.  This will help protect your capital.
  4. Don’t over trade
    • As a new day trader, you want to stay away from entering multiple positions.  This can cause distraction and put you at a much higher risk of making a bad trade.  Don’t get out of control because it is very easy to do so with the type of cash you can make. Always stick to your plan.
    • If you have a margin account and your account value is below $25k, you will be limited to 3-day trades within a 5-day rolling period.  If you exceed 3-day trades within a 5-day rolling period, you will be flagged as a “Pattern Day Trader”.  You can review this information on the U.S. Securities and Exchange Commission website here.  
    • You can ask your broker to forgive you, if you honestly made a mistake and was flagged as a “Pattern Day Trader”.  They can forgive you and remove the flag once for the life of the account. If this is not an option, you can always switch your account from a margin account to a cash account.