How it Actually Feels to Day Trade

Money Stacks How it Actually Feels to Day Trade Experience

Let's pretend that we are actually day trading in order to experience what it feels like when you trade. Rather than using candlesticks, we are just going to look at the price as it fluctuates. Instead of pretending to buy hundreds of stock, we will make it simple by buying one stock at $5.27 and calculate that a 1% increase would be $5.32. We also set our stop-loss price to -1% or 99% of the original value, which is $5.22. In reality, a half percentage is a better stop-loss for those with a lower risk tolerance, but we will use -1% for simplicity.

Now, we watch our stock's price as it fluctuates. Pay close attention to each number and pretend like you are actually watching the price fluctuate in order to experience how it would feel if you were trading this stock. Our stop-loss is $5.22, our buy price is $5.27, and our profit goal is $5.32.

Related: Stocks vs Forex: Why Trade Forex?

Day Trading Example

Scroll down slowly so you can experience how it would feel if this was your money.

$5.27 (0.0%)

$5.26 (-0.2%)

$5.27 (0.0%)

$5.28 (+0.2%)

$5.27 (0.0%)

$5.26 (-0.2%)

$5.25 (-0.4%)

$5.24 (-0.6%) We are getting close to our stop-loss. Should be bail on the trade?

If we did hit our stop-loss then, yes, we should get out of the trade at a loss.

$5.25 (-0.4%)

$5.26 (-0.2%)

$5.27 (0.0%)

$5.28 (+0.2%)

$5.29 (+0.4%)

$5.30 (+0.6%)

$5.31 (+0.8%) We have almost reached our goal of 1%.

$5.30 (+0.6%)

$5.29 (+0.4%)

$5.28 (+0.2%) Now the price is going back down. Should we sell and accept a lower percentage?

Since we were fairly close to that 1% mark, we can set our mental trailing stop loss at our base price. If it drops back down to $5.27 then we should sell with no profit. This is all about risk management. If the price is trending down, then we accept our loss and get out before we lose any money.

$5.29 (+0.4%)

$5.30 (+0.6%)

$5.31 (+0.8%)

$5.30 (+0.6%)

$5.31 (+0.8%)

$5.32 (+1.0%) We hit our 1% gain. Should we sell now, or see if it goes up higher?

If we are going to aim for a higher percentage, then we risk losing our gains if the price drops back down to our trailing stop-loss of roughly $5.27. We cannot predict the future so we either need to get out now or risk it.

$5.33 (+1.2%)

$5.32 (+1.0%)

$5.31 (+0.8%)

$5.30 (+0.6%)

$5.31 (+0.8%)

$5.30 (+0.6%)

$5.29 (+0.4%)

$5.28 (+0.2%)

$5.27 (0.0%) We waited too long and it went back down to our purchase price. Should we sell now or see if it goes back up?

We should sell now, since our base price became our new stop-loss. However, let us pretend like we made the bad decision of choosing not to follow our rules and kept the stock. We were so close to the win. We could have won if we had sold at 1%, but we waited for a higher percentage. This is when emotion will start to take control and cause you to make bad decisions.

$5.26 (-0.2%)

$5.25 (-0.4%)

$5.26 (-0.2%)

$5.25 (-0.4%)

$5.24 (-0.6%)

$5.23 (-0.8%)

$5.22 (-1.0%) We hit our original stop-loss. Should we sell at a loss? Should we hope it at least goes back up to our buy price?

We should have sold when it hit our original price, because that was our trailing stop-loss.

$5.21 (-1.2%)

$5.20 (-1.4%)

$5.19 (-1.6%)

$5.20 (-1.4%)

$5.19 (-1.6%)

$5.18 (-1.8%)

$5.17 (-2.0%) We are losing more money. Should we exit? If we exit we will lose a lot more than we intended. Let's pretend that we decided to not exit. There's a huge drop in price and the close is $3.00. If we had traded with 100 shares, that would be over a $200 loss!

Analysis of Day Trading Strategy

Day Trading is all about risk management. It is impossible to know what the market will do, even with technical indicators. The market is unpredictable. If you make your profit goal a lower percentage, then you will be successful much more often than those who aim for 1.5% or 2%. Once you hit your mark, the only reason to stay in the trade would be if the price is clearly moving up without any back-tracking.

It is a good idea to move your mental stop-loss as you achieve certain goals. For example, if we make it to the 1% gain of $5.32 then this number should be our new stop-loss if we are aiming for 1.5%. This means that if you get to 1.4% and it starts heading back down to 1%, sell as soon as it hits 1%.

Be careful, because greed will destroy you as you continually chase a higher percentage. Rather than dwell on the fact that you missed a great opportunity to get a 5% gain, realize that choosing to not attempt that 5% gain prevents you for losing hundreds of thousands of dollars on all the times you would have lost money trying to get that 5% gain.

Most Important Rule to Follow

The most important rule to follow when day trading is to obey your stop-loss. Do not let your emotions get in the way. Follow your exit strategy, and be willing to lose on the trade. The purpose of the exit strategy and stop-loss is to stop losing money. Exit the trade and look to start a new one.

Stocks vs Forex: Why Trade Forex?

Want to easily calculate your stop-loss and profit goals?

Download this easy-to-use Stock Profit Calculator. Just type in the stock price and it will automatically fill with stop-losses and profit goals. You can also change the percentages to match your personal needs, as well as enter in your margin use in order to keep your stop-loss at -1% of your account value.

The cost is only $1, which is just to help cover the costs of the automated system to send you the Calculator.

Stock Profit Calculator for Daytrading/Day traders - InvestGrowRepeat.com

Get the Stock Profit Calculator now.

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