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The requirements for day traders are straightforward:
- You need knowledge of the profession. There’s indeed a lot to learn, but it’s not mystical. If you put in the hours, you can acquire a solid foundation of knowledge over some months.
- You’ll need basic computer gear. When I was a day trader cub, I thought it was cool to have ten monitors and a powerful computer tower. I discovered it was overload. Now, I use a standard laptop and just three monitors.
- You need a day trading brokerage account. U.S. accounts require a minimum of $25,000 to be maintained in the account, but you can open a foreign one with $500.
This brings us to the last requirement: the right applied attitude.
When I say “applied attitude,” I mean you can have the best attitude, but if you don’t take actions consistent with that attitude, you’ll fail. For example, if your attitude tells you that you need to be done with trading for the day because of the mistakes you just made — but you decide to take just one more trade — you will soon be toast.
What are examples of trading attitudes that harm or help? Here are four:
1. Fear as a brake vs. fear as a motivator
My inspiration for working hard to become a successful day trader had nothing to do with seeing myself driving a Lamborghini. It had to do with seeing myself homeless if I didn’t find a solution, pronto.
I lived in a modest house in Vermont with my dog. My trading account was down to the $25k minimum, and I had $30k in credit card debt. I was also down to the last few things I could sell on Craigslist to raise cash.
Fortunately, I had kept a trading journal. As a last gasp before taking up some other profession, I analyzed my winning and losing trades and found certain patterns. Long story short, I turned my trading around. If that fear had led to inaction, it would have ended my trading career.
Related: Want to Make Enough Money to Live A Great Life? Start By Setting Your “Freedom Number”
2. Scarcity vs. abundance
A close cousin to a fear mindset is a scarcity one. The first saying I ever learned was: “A penny saved is a dollar earned.” Money was always tight, as we were continually reminded.
I learned about my great-grandfather, who was on the floor of the New York Stock Exchange in 1929 on the day of the crash. He lost everything. That trauma rippled down through the generations to me. I had the feeling not only of scarcity but that you couldn’t depend on others for job security. That was reinforced by what happened to my mother: After four decades of working at a hospital, she was laid off.
Years later, I learned about my great-grandfather’s brother-in-law. He started an investment company following the Great Depression, and he made millions.
Here we have a member of my extended family, in the same enveloping Great Depression, who engineered a vastly different outcome. I was intrigued by how this branch of my family did not have a scarcity mindset. It opened the door in my mind to the possibility of thinking differently.
Let’s jump to today. Not only have I turned $583 into more than $10 million by day trading, but I’ve had the privilege of working with thousands of other people on their own day trading journeys. I see two other attitudes at work in some of them.
Related: 3 Simple Strategies for Success When Money Is Scarce
3. “My situation is different” vs. “How can I make this work?”
In one sense, of course, we are all unique. But this characteristic can be taken to an extreme — it can invalidate any advice.
Let’s say you’re reading about a successful franchise owner. You love how this person overcame many obstacles to get where she got. Then you have a choice:
You can look for reasons why your circumstances are different and her situation does not apply. For example, you might think: “It’s easy for her to succeed, but English is my second language.” Or “It was easy for her because she benefited from the whole pandemic hysteria, and we’re now over that.”
If you look hard enough, you can find endless reasons why someone’s success differs from your circumstances.
Or you can look for handholds.
Think about rock climbers: At any moment, there are a hundred ways not to move up the wall, but they look for one little spot to grab to pull themselves higher toward their goal.
The path of least resistance is to look for reasons why someone else’s success does not apply to you. The path of progress comes when you find what you can use from that person’s example.
Related: 3 Things Traders Must Do to Have Success With the Market in 2024
4. Following a recipe vs. “I know better”
I’m all for people expressing their unique style. But when you are learning a skill, the time to show how unique you are is after you’ve mastered the skill.
There are three types of cooks: those who wing it and are happy, those who read a recipe but don’t follow it, and those who follow the recipe. If these people try day trading, only one has a hope of succeeding.
- If you wing it, come across a hot tip, open a day trading account and have at it, you will be slaughtered in minutes.
- If you study successful traders but decide that you can modify their advice, you’re doing so with no experience. Your days are numbered.
- If you first follow their instructions, this allows you to stand on their shoulders and learn their discoveries. In time, you can then modify their principles to match your experience.
Day trading for beginners is difficult enough without hobbling yourself with ineffective methods. The right mindset is a foundation on which to make effective decisions. Those moment-by-moment decisions will determine your success in this wonderful but challenging profession.