Want to know about Day Trading? What is day trading? People earn lots of money through day trading. So, today, in this article, we will learn all about Day Trading, what it is? And what are the top day trading tips for beginners… All will be covered in detail and to provide useful tips.
What is Day Trading?
Day trading is basically a strategy that involves selling and buying of financial instruments such as stocks and currencies in a same day. By doing day trading, you can get profit from small price differences. Is it safe or always risk free?
Well, it’s not. How? Due to rapid economic changes, shifting interest rates, and geopolitical developments, there’s a lot of price swings which makes it profitable as well, and risky as well at the same time.
To get profit all the time from day trading, one must have risk management skills and complete awareness of the market. There are lot of platforms that help improve day trading strategies and reduce the cost as well. They also teach how to use indicators and perform trading activities.
How to Begin with Day Trading?
Starting day trading includes gathering financial resources, setting up a broker, and investing in self-education and strategic planning. Retail day traders don’t require a specific undergraduate or graduate degree, but it’s preferable and important to understand trading principles and strategies.
Here’s how you can begin Day Trading:
Step 1: Read Material
The first step is to read material regarding day trading basics. Read books, enroll in courses, and study financial markets. The most important topic that you should research in the start is technical analysis in trading. It includes trading mechanisms and risk management
Step 2: Create Trading Plan
Make an outline of your trading goals, risk limits, and trading strategies. By creating trading plan, we mean, you should have a clear picture of when to enter and when to exit, and how much capital you are going to invest. Practice on simulator or demo account before putting your real money.
Step 3: Select the Trading Platform & Deposit Real Money
There are lots of trading platforms and it’s not like they are fake or something. Trading platforms are real. You only need to select those that offer instant withdrawals and have low fee structure. After finalizing one, you just need to deposit real money and you are good to trade.
Step 4: Start with Small Positions
One last tip is to start with small positions so you don’t lose all your money at once as there is risk also involved. Start with small positions, understand the market, master the indicators, and then go with the higher ones. Day trading means you need to make quick adjustments according to the changes in the market.
Day Trading Tips for Beginners
- Awareness is the Key to Success
Day traders must keep an eye on latest stock market news, including the interest rate plans and indicator announcements. To make better trading decisions, create stock list in which you want to trade, stay informed about selected companies, their stocks, general markets, and scan business news regarding those companies and bookmark reliable online news channels.
- Start with Additional Funds
To be successful in day trading, start with additional funds that don’t disturbs your budget and only trade with reliable online brokers and platforms. Successful day traders start with less than 1to 2% of their total amount per trade. They set the loss limit as well.
- Start Small
As mentioned earlier, starting with small positions will give you chance to explore and learn trading while losing or profiting a small portion. The good tip is to start with maximum two stocks. Another good thing is that companies now offer fractional sharing which allows you to trade with a small amount of money.
This means if Amazon stock AMZN is being traded at 150$, brokers will allow you to buy fractional share at 5$ and start trading.
- Stay Away from Penny Stocks
Penny stocks are often hard to sell, risky, and rarely give big profits. Many stocks under $5 get removed from major exchanges and can only be traded in less reliable markets (OTC). Unless you’ve thoroughly researched and found a genuine opportunity, it’s better to avoid them. Finding working undervalued stocks is tough.
- Time Matters
Trading market starts early in the morning and it is the best time for trading. Experts can identify patterns and timely trade that can give profits. Beginners should study the market first without taking any actions for 15-20 minutes. Middle hours are less volatile, and movement picks up towards closing.
Rush hours offer big opportunities and jumps, but beginners should avoid them. Although there is a potential still, it’s safer for beginners to avoid rush hours in beginning.
- Set Limit Orders
Limiting orders mean to set higher and lower limits while trading. This allows controlling losses and profits as well. They help to trade in a more precise way by setting the starting price.
Limit orders help you control losses when market reverses, but they only work if the market hits the price you set otherwise, the order won’t fulfill. Experienced day traders use option strategies to protect their amount.
How Much Do Day Traders Make?
Earnings of day traders depend upon their experience and market exposure. The more you know about trading strategies and own different skills, the more you earn from day trading. Due to lack of knowledge and expertise, few of them succeed. Keep in mind day trading involves significant risk and is not suitable for everyone.
Conclusion
Day trading is a risky and challenging skill that requires time, skill, and discipline. Many people lose money while trading but if done correctly with right exposure of the market, you can make huge profits as well.
Day traders, whether they work for big institutions or trade individually, help keep the market running smoothly by ensuring fair pricing and providing plenty of opportunities to buy and sell. With experience, skill-building, and consistent performance evaluation, one can improve their chances of trading profitably.