By Sandra MacGregor
To an outsider, the life of a day trader may seem glamorous—watching the market minute by minute, waiting for the perfect opportunity to make vast amounts of money in a single trade. But the reality can be quite different. Long hours, low returns and inconsistent income comprise the other side of a day trader's life.
To help shed some light on the subject, Blain Reinkensmeyer, managing director of Reink Media Group, offers an insider's look at what it takes to be a day trader. Reinkensmeyer has been involved with the markets for 14 years and is the co-founder of StockBrokers.com, a site that has helped over one million investors compare online brokers since it was founded in 2011.
1. It's The Best Of Times, It's The Worst Of Times
“The best thing about being a day trader is the independence. You don't have a commute, you walk to your desk, you're your own boss, and there is unlimited earning potential," says Reinkensmeyer. Despite his obvious passion for his chosen profession, he's quick to point out independence comes at a price. “The worst part is the grind; there are incredibly long hours and never knowing what the day is going to bring can wear on you."
2. You'll Win Some And You'll Lose Some
“The coolest trade I ever had was when three hours into the trade the stock halted trading and news was released that the company was being bought out. I made a 30 percent return in less than three hours," says Reinkensmeyer, clearly still savoring the win.
But there’s a loss that still gives him nightmares. He had a stock that was performing well into the afternoon, so he decided to sell half but let the other half ride. The next morning he saw the stock had still done well after hours so he left for an appointment, confident he would return home to a profit. By the time he left the appointment, he was looking at a 15 percent loss. “It reminded me of a very important lesson: nothing is ever guaranteed in the market no matter how promising it looks."
Lesson learned — and to this day, Reinkensmeyer never makes morning appointments.
3. The Best Strategy Is To Be Yourself
One of the most helpful books Reinkensmeyer has ever read is Trade Your Way to Financial Freedom. In it, longtime investment expert and financial consultant Van K. Tharp tells traders to align their work with their personality, because trying to copy someone else's strategy usually leads to disaster.
4. The Homework Never Ends
Traders need to research potential stocks constantly. They also need to analyze themselves. Just as professional athletes spend a significant portion of their training off the field reviewing their prior performances, traders must review their past trades and behaviors. “This is something many, many traders overlook," says Reinkensmeyer. “It's critical for success because by analyzing yourself, you're identifying the stakes, tweaking your strategies and honing your skills."
5. Redundancy Is Key
While a few day traders favor a laptop, the majority have several screens. Reinkensmeyer relies on no fewer than six to keep him in the game at all times. There are even traders who have more than one Internet provider to ensure they're always connected.
6. You've Got To Be In It For The Long Haul
“That get-rich-quick lifestyle of girls and yachts is just not the way it works," insists Reinkensmeyer. If you become a trader thinking you're going to be an instant millionaire, your portfolio is going to be taken to the cleaners over time. Successful trading is a life-long game — you can't just do it for a week or a month and think you're going to change your life.
7. Day Trading Is Not For The Faint Of Heart, Or The Emotional
Not only do day traders endure high pressure and stress, they also have to ensure they keep their emotions at bay. “The best traders will have the same reaction whether they have a monster winner or a monster loser," says Reinkensmeyer, who imagines that many traders will one day use wearable health trackers to assess their heart rate in real time. The best traders never let emotion come into play and have very strict rules about when to buy or sell.
Traders govern themselves by rules and by routine — not emotion. And that, notes Reinkensmeyer, is one of the hardest parts of being a trader. Well, that and never being able to take a morning appointment.
Sandra MacGregor is a former magazine editor and an internationally published writer. She writes on a variety of subjects including finance, lifestyle and travel. Her work has appeared in the New York Times, the Boston Globe, Washington Post, the UK Telegraph and the Toronto Star.
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