You can make yourself a whole lot of money day trading. You can also lose everything. In the fast-paced world of day trading, the people who flourish as traders and build fortunes are the ones who have set themselves up carefully, done their research, taken only risks that they are fully conscious of, and kept their calm during tough moments.

Day trading successfully takes a bit of industry know-how and a whole lot of wisdom and perspective. Here’s what you need to know about day trading the right way.

Preparing yourself financially

To start day trading, you’ll need money. It takes money to make money, so you’ll need start-up capital for your day trading dreams.

The money that you use to day trade should not be your long-term savings. Your retirement fund should not be put at risk, even if you believe that you have a chance to make big money. And you’ll need one more stash of cash, too — an emergency fund.

You have a lot to learn about trading and investing before you get into day trading (and we’ll talk a bit more about that in a moment). But no matter how much you learn, you are going to have bad days as a day trader. You will lose money some days, and even your successful bets can create lean times as you wait on the fruits of your decisions.

You’ll need money to get by at these times. You’ll need to know that you can still support yourself and your family even when things go wrong on a given day or during a given week — or even month. Just like everyone else, day traders need emergency funds. And day traders need bigger ones, because their income is less predictable.

Understanding your craft

Day traders make a lot of trades — that’s the very definition of a day trader! They have to make fast decisions and evaluate complex situations that typical investors do not have to deal with. And this means that day traders need to know more about what they’re doing than the typical investor does.

You should read up on investment strategies and on the types of investments that you’re focusing on. Furthermore, you should develop a trading strategy and stick to it — that will help you make rational decisions even when things get crazy.

Practice your strategy with investment simulation programs, which will let you “invest” fake money and test out your trading acumen. It’s a lot better to learn with fake money.

Evaluating your risk

As a day trader, you’ll live with a lot of risk. Opportunities for big profits tend to come with big risks, and day traders may open themselves up to risk by using advanced strategies to short-sell, trading on margin, or investing in volatile stocks like penny stocks.

You can and should take risks, but you should also be fully aware of the risks you are taking. If you’re day trading cryptocurrency or penny stocks, you should know what that means for your emergency funds. Be aware of the ways that risks can compound, too — for instance, if you take a loss, you might not be able to trade as much on margin (and might get a call from the risk assessment team at your brokerage).

Smart day traders take risks, but they always know the risks that they are taking. Manage your risk with stop-loss orders and keep it carefully calculated.

Keeping your cool

Day trading is stressful. It’s easy to overreact to a big gain or a big loss. The best day traders, though, are able to keep calm.

You need to make rational decisions and stick to your strategy. Let your rules, not your emotions, be your guide. And try to keep your emotions in check and your stress levels down, too — you could try meditation or simply know when to step away. Be conscious of your thoughts and think deliberately. You can do this — you’re a day trader!