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Willingness to Exit Trades at End of Day

Still another important quality which the day trader must develop is the willingness to exit positions by the end of the day. Veteran futures traders jokingly define long-term positions as "day trades which ended the day at a loss." The lesson here is that all too many traders enter posiВэtions originally as day trades; however, if these trades show losses at the end of the day, they are inclined to hold them overnight or longer given their refusal to take the loss. The justification or excuse is that the trade probably has more than mere day-trade value. Holding a position overnight, particularly a losing position, is perhaps the single greatest offense that a day trader can commit. Frequently, it is also the single most costly violation of the rules.

Accepting Losses

The successful day trader must learn how to accept a loss and when to recognize that this rule is being violated. There are some very specific and simple procedures for doing this which will be discussed later on. The day trader must be willing to accept what he or she has achieved by the end of each day without undue frustration and /or wishful thinkВэingтАФwin, lose, or draw. As human beings we always look back on what we have done, often with regrets, thinking that we should have done things differently. Although in many cases it is certainly true that things should have been done differently, lamenting that fact is not construcВэtive. Learning from it, however, is the appropriate response. Each loss, if taken at the right time, is a lesson. Each loss will teach you something important. If the amount of the loss is approximately what it should have been in terms of your system or method, then you have learned that you can follow your system. If, however, your loss is not taken on time and therefore becomes larger than it might have been, then you have learned that to go against your system will cost you money.

Daily Analysis of Results

Day traders should have a formal procedure for analyzing their results at the end of each day in order that the maximum amount of learning be extracted from each trade, whether that trade was a profit or a loss. This, of course, requires some degree of organization and consistency. I will discuss the importance of your trading diary in considerable detail later on. At this time I urge you to begin keeping a diary if you are not already doing so. You'll be absolutely amazed how much you can learn by jotting down your comments at the end of each trading day (or preferably during the day). It only takes a few minutes, and the reward is literally hundreds of times the cost.