Be Aware, Stay in Control

As a day trader, a multitude of things that can go against any trading plan. Whether set back by a change in monetary policy, an unfavorable analysis of a particular stock or a movement against a whole sector of the market, uncertainty exists as a perpetual component in the life of a trader. The trader cannot hope to control these events, and instead must adapt to them. Individual day traders possess differing levels of tolerance for uncertainty in the market. Every trader needs to identify and trade at a comfortable level of risk, lest the stress of trading force him into making bad decisions.

The trader can do nothing more beneficial for his trading than maintaining himself at manageable levels of stress. The conservative trader seeks to avoid as many adverse events as possible. He religiously follows economic reports and earning announcements, dissecting them for every possible bit of insight. He understands the impact of these reports, and avoids trading until he has recognized their full ramifications. His most prudent strategy is to avoid open positions when these quarterly reports are due.

In the end, the risk tolerance of the trader determines his response to uncertainties in the market. More risk-tolerant traders choose to speculate on the outcome of earnings reports or change in monetary policy. He must, however, never allow his tolerance for risk to forgo performing due diligence on any such speculative trade.

The successful trader maintains a wariness of the market events capable of affecting his trading plans. His less successful counterpart, on the other hand, will ultimately devote the majority of his time and psychological well-being defending against the losses incurred by a poor decision-making process. Only by remaining aware and in control of his emotions can a trader hope to be successful in the long term.