I've defined a few key areas that I believe are crucial in order to be successful at trading. I have no doubt left out some important items, but this list is a good start and it is my belief you should take it to heart if you are having trouble with your trading. You cannot truly become successful until you look within and conquer these important items.
Trading must be respected. You must be focused. Disciplined. You can't have constant interruptions and distractions around your workplace if you expect to be a good trader. Many traders say it is like war, you are literally doing battle for life or death in the trading world. How can you expect to win if your phone is constantly ringing, or if your kids are playing in your office, your dogs barking, or if you are replying to emails, etc. I don't think those things would go over well in a real battlefield.
Your trading environment needs to be calm, private, and comfortable. Turn your cell phone off, close your email, and explain to your family that you cannot be interrupted. Make yourself comfortable, relax. Move a coffee pot directly into your office, buy a nice office chair. You need to be "in the zone".
Many of us enjoy most the ability to work from home, but it must be treated with respect. If you can have a few uninterrupted hours then you can make great trades and be done with earning a living before lunch, then have the rest of the afternoon and evening to devote to your family.
The proper tools are essential for making money. Tools can range from your computer, your software, your internet connection, etc. You need to probe your tools for weaknesses and if it is a major flaw, correct it. For instance, don't trade if your Internet connection is unreliable. You need to correct that. Don't trade if your computer is too slow and your charts freeze during heavy market volume.
But primarily I am referring to indicators on your chart. Many traders have way, way too many indicators. Some trades have none, trading strictly based on price action and momentum. I strike a balance somewhere in between. If your chart has too many indicators you will get conflicting signals. How is this useful? I suggest starting with a clean chart, and then adding only the absolute essential tools to it.
I use three charts to trade the S&P 500. A big time frame chart for overall trend, a medium chart, and a short time frame chart for entries. These can be a 10946 volume, 4181 volume, and 4 range chart respectively. Each chart has a purpose. Each chart has unique indicators. The big chart has one volume indicator that helps me visualize upward or downard pressure. The medium chart shows support and resistance areas and medium trend reversals. The small chart is just for entries and shows only small time frame entries and a very quick trend reversal indicator.
Many traders also emphasize the importance of picking the right broker and data feed, not to mention charting and execution platform. I use Amp Futures, Zen Fire, and NinjaTrader, respectively.
It is interesting how many traders believe they can make 100k a year after six months of looking at charts and reading books. Why would one think that trading requires less education than say a lawyer or a doctor? These professionals spend years, many many years, learning their trade. A successful day trader should expect to spend years as well.
Education is not free. Most successful traders blow out their account at least once or twice before they went on to make money. It might help to think of this as tuition, instead of as losing money. Education is expensive in other ways as well, not just financially but also mentally, emotionally, and time consuming. You have to devote yourself to it in the same ways a professional athelete would before running a marathon. They don't just wake up one morning and grab something at McDonald's to eat before they run the marathon. No, they train for months to condition their bodies, have strict diets, etc.
You need to condition yourself for trading, and to do that you have to educate yourself. Books, videos, classes, the Internet, and probably most important -- first hand experience.
Education is important, but experience is key. Why do employers prefer candidates with not only college degrees but also on the job experience? Simple, experience is the most powerful way to perfect your skills. Putting what you've learned into practice is not easy. The experience of actually trading, not just reading about it, is what will really motivate you to learn and be successful.
You can read about support and resistance, or read about taking the emotion out of trading. But until you experience a trade that stops on a dime because of support or resistance, and then furthermore it stops you out of a trade that you were confident would be a winner, then you really can't fully understand the importance of what you read about (support/resistance and emotions).
With experience comes wisdom, and wisdom is required to properly assess your trading. I think most successful traders had that "ah-ha!" moment when they realized they were the problem (ie: look yourself in the mirror, the problem is you not following your own rules). You cannot have that epiphany if you lack the experience and wisdom to be a proper judge, even of yourself.
Everyone will recommend that new traders sim trade until they are profitable. But they also realize that 1) they didn't follow this rule themselves, and 2) even if they had, they would not have learned the same lessons until they traded and lost real money. Sim trading is great, but it is more like being on the outside looking in. It is not until you've placed cash trades and lost enough money to be "painful" that you will start to change your ways, your rules, yourself. That is because you are gaining experience by learning from the past.
In order to be successful, you must have a detailed trading plan that you trust, respect, and most importantly -- follow. You wouldn't decide to build your next home from scratch without blueprints, why would you step into trading without a plan?
First, you need a written plan that goes over rules. These are when you will, and when you will not trade. I am not just talking about technical analysis, I am also talking about "I will not trade when I am not 100% focused and in the zone". The trading plan also needs to describe, in detail, your trading methodology. Describe your setups. What actions do you take when you get stopped out? What actions do you take when a trade is going against you? What actions when you have met your daily goal?
Second, you need to plan your trades in real-time. You should not try to predict the market, meaning don't try to pick a low, or pick a high, but rather you need to anticipate or prepare yourself for what is coming. By preparing for the next trade, you can anticipate what your setup will look like when it forms, what your actions will be. You must be ready to execute your trade when it is your setup and meets all of your rules. If you hesitate as that is occuring, you can and will lose money.
Take what I have said to heart. Trading is not for everyone, so if you are having trouble accepting this information then you might want to consider another profession. It would almost certainly be a lot easier on yourself, your family, and your bank account. However, for those of us who push onward and conquer our demons, the benefits of being a successful day trader are endless. It is, after all, the near-perfect job.
Force yourself to realize there is no Holy Grail. The way to make money in trading is not by having the perfect indicator or automated strategy. No, no, no. The way to make money in trading lies within your ability to understand yourself and become an expert in the market you are trading. There are no short cuts.
Please visit Investopedia for help on creating your trading plan. I also would like to try and help as many of you as I can, so leave your comments and use the chat box. Other traders on this site have generously offered up their time to help as well, you will find many of them have gone through everything you have, and more, so take their advice to heart.