James Altucher has made millions from day trading stocks, but the investor and entrepreneur says this type of trading teaches you more about yourself than any other activity. He says that day trading is the best job in the world when you make money, but it’s the worst job in the world on a bad day. Take these quick tips from Mr. Altucher into mind before you decide on a career path as a day trader.
You Can’t Predict the Future
Altucher’s advice to anyone looking to get started with day trading is that you cannot predict the future, so stop thinking you can. He says you’ll have much less stress in your life if you let go of the notion that you can predict the future by affecting it with changes in your present. Instead, think of potential investments as increasing your odds of success rather than a foregone conclusion. This tidbit is solid advice to anyone looking to break into the hectic world of day trading but it’s not the end all be all outlook that most traders expect when their eyes get big with cash signs.
Market Uncertainty Can be Your Best Friend
While market uncertainty may drive buy and hold traders fleeing from the market, this is the best time for a day trader to step in. Uncertainties create all of the opportunities in our lives and getting comfortable with capitalizing on those uncertainties is the best way to hone your instinct for trading. Use the resources at your disposal to help you formulate a sound trading plan that can be executed, but always be ready for uncertainties in the market to capitalize on them.
Diversification is Important Even for Day Traders
Think of all the opportunities you’ve had in your life to make an important decision. When you interview for a job position, you often interview with multiple companies. The same can be said for all the dates you have when looking for a significant other. This sort of behavior is diversification at its most broad terms and is what helps you get the most out of life. In the world of trading, it can be tempting to ride the ups and downs of one particular stock, but day traders should be aware that this strategy will not always be available. Diversify your approach and the stocks you’re trading, and you are more likely to see success. Diversification should go beyond just trading different stocks, too. If all of your traded stocks are part of the biotech industry then when an FDA trial for a popular drug is denied you can expect to see them all go down. Diversify the industries you day trade, as well as your stock portfolio and you are less likely to experience these massive red waves.
Learn When to Say No to Yourself
This tip is probably the most important core skill for any day trader. No one wants to continue to throw good money after bad, so day traders have to learn how to say no and cut losses. The same is true for any business relationship where you’re just not getting the results you expected. Commitment bias can be a deadly sin for a day trader since it is a logical fallacy that says the more you commit time and energy to a pursuit, the more you should stick with it. That’s flawed logic on the trading floor and could lead to severe losses in anyone who doesn’t know how to let go.