Stepping into the stock market for the first time can be intimidating. Take the leap with confidence with this guide to successful day trading.
Day trading refers to buying and selling financial instruments over the course of a single day.
The basic idea is simple. You focus on small price moves and attempt to capitalize on them. This tactic can be a lucrative endeavor, but it’s no cakewalk. Alternatively, you could check out this stash app review to see how investing in this manner can prove lucrative in its own right.
All those from-rags-to-riches-overnight stories are overblown. Don’t get seduced by them.
Newbie’s have a hard time gaining a foothold in a competitive arena. They lack practice and know-how to deploy strategies that work reliably.
The good news is successful day trading is no game of chance. There are ways to develop your game plan ahead of time and hit it big. They all hinge on your ability to get accurate data and uncover the right opportunities.
This may already seem like a lot to handle and it is. But don’t fret because we’ve got you covered. Here are some tried and tested tips to guide your efforts.
The Essential Rule Book
Rule number one of day trading is to always do your research.
It’s all more of a full-time job than a pastime or hobby. Your prospects are directly proportionate to the amount of due diligence you invest.
This is also to say the venture calls for a huge time investment and undivided attention. You must also set your emotions and presumptions aside. Your primary concerns are the latest stock market goings-on.
We’re talking about all trends, conditions, and events that affect stock prices. Keeping up the pace is challenging, but we can always count on reputable news outlets and financial websites.
Next off, figure out how much money can you afford to risk on trades. There are no hard rules, although most traders aim for a certain sweet spot— around 1% of the account.
Likewise, it would be wise to establish a maximum loss per trade and set aside a fund. Remember that most people start small and gradually step up. They aim for one or two stocks every session.
Smart tactics, such as trading fractional shares, are more than viable. Their main advantage is a lower risk, which stems from small dollar amounts.
Finding Suitable Entry Points
Moving on, define your exit and entry methods.
They vary wildly from trader to trader and that can be confusing. To make an educated decision, base your approach on factors like uptrend’s, trend lines, and triangle patterns. Put it all in black and white and have it as a constant reminder in front of you.
Once that is sorted out, identify your targets and compile a list. Get to know companies emitting assets and assess the general market landscape. Learn to pick up on patterns and beat other investors to profitable targets.
Also, try to be realistic about potential gains. You cannot expect to hit a jackpot right away. In fact, you don’t even have to win all the time to build a solid portfolio. Many accomplished traders score wins only half of the time.
That is to say, the total of their wins ultimately exceeds all the losses combined.
Another piece of the puzzle comes in the form of timing, which you have to get it absolutely right. And because of minute price movements, move fast.
The tricky thing is that opportunities can arise. That being said, middle-of-the-day hours are more stable, while the morning rush hours are volatile.
Whatever happens, don’t succumb to panic. It never did traders any good.
Tricks of the Trade
Determine the orders and targets you’ll go for.
Two main options are market orders and limited orders. They both have their pros and cons you would do well to weigh.
In a nutshell, market orders offer the best price at a certain point in time. Limited orders guarantee the price, but not the execution. That means they give you mere precision by allowing you to set buying and selling rate.
Because of this property, they are a sound course of action for beginners. As for more seasoned traders, they often use option trading strategies. This avenue is highly profitable but comes with risks too.
Another crucial thing is to factor in multiple indicators whenever searching for individual assets. These are liquidity, volatility, and trading volume.
Volatility is the reflection of the expected daily price range. The more volatile an asset is, the greater the potential profits and losses are.
Liquidity is the quality that enables favorable enters and exits. It signifies the degree to which an asset keeps an intrinsic value in the face of market activity.
Finally, trading volume denotes the number of times asset is sold and bought. It is a sign of how much market interest there is.
Successful Day Trading: Almost There
Day traders require brokers to deal with a high volume of trades.
And not every broker is eager to do this. Those that employ advanced platforms with specific features geared toward quick successions of orders. These are, for instance, dedicated charting tools and real-time streaming quotes.
Choosing a broker is just one step on the journey.
To go an extra mile, you can look for ECN systems. They represent various computer-based networks that feature best ask and big quotes. A great selling point is they automatically match and start orders.
There’s no shortage of other tools worth noting, such as level 2 quotes and Intraday candlestick charts. Make good use of them to avoid lagging behind.
Last, know when to exit a winning position. Most traders do it when they detect a decreasing market interest. They also use tactics like profit targets, scalping, fading, daily pivots, and trailing stops.
Once you commit to your strategy, stick to it. In due time and with proper risk management, it will yield results.
Time to Seize the Day
Successful day trading is all about cold logic and hard numbers.
It’s a craft that’s easy to start and hard to master. You need to ditch emotional biases and play your cards well. Your best bet is to rely on beginner-friendly trading strategies.
Do the homework and come up with a well-thought-out plan. Have a clear method and rules behind decisions on what and when to buy. Familiarize yourself with the basic trading procedures.
Remember to keep the fingers on the pulse of the market and carry out ongoing performance assessment. Track and test trading opportunities: this is a way to take advantage of the short windows of opportunity.
Following these surefire tips, you’ll limit your losses and maximize returns. Check out the rest of our financial section for more insights.
Shift Frequency © 2019 – Beginners Guide to
Successful Day Trading