Day Trader's Self-CheckList
Are you ready to day trade?
Find out before risking your money.
You've been learning a lot about day trading and now you're anxious to start trading your new account. You want to start making money now, right? Not so fast.
Here's a quick day trader's self-checklist to help you determine whether or not you really are ready to day trade with real money.
The above day trader's checklist is just a quick list of things I'd like you to think about before placing that first real money day trade.
- Do you know what a "Pattern Day Trader" is and the SEC's requirements for a pattern day trader's stock trading account?
- Do you have a solid plan for how you are going to trade? Have you written it down?
- Are you going to be doing price action trading or indicator based trading? Do you understand the difference?
- Do you know exactly how you are going to enter a trade? Buy-stop orders, market orders, limit orders, etc.?
- Do you know exactly where and how you are going to place a stop order for each and every trade?
- Is there a plan for taking profits? Will you be using price targets or trailing stops?
- Are you familiar with the term “position sizing”? Do you fully understand trading money management"?
- Have you done enough preparation and homework to determine whether or not you will be trading a system(s) that will have a chance at having a positive expectancy?
- Have you practiced enough on a high quality day trading simulator? Did you account for commissions when using the simulator? Were you profitable
on the simulator? (If no, then why trade real money?)
- Is your mind prepared from simulator trading to accept and recoup from possible long drawdown periods?
- Do you have adequate capital in your account to ride through these inevitable drawdowns?
- Even though you might've done well on a simulator are you wise enough to trade very small positions, and protect your capital until you've proven to yourself that you're ready for bigger size? Or, are you going to let your ego blow up you account before you've accumulated enough day trading experience?