Day trading is the act of buying and selling an asset or capital in a day. Often the asset or financial institution can be traded multiple times over this period. Day trading has been a specialized job for the knowledgeable few but over the last few years, this has gained wide popularity with online trading. Online trading has made this one of the most convenient and fastest ways to grow your assets.
Day trading appeals with the challenges and the calculated moves required to take advantage of the small price changes. To the seasoned trader it is a calculated risk but for a newbie it can be dangerous. If you are interested in day trading and would like to watch your assets grow, then here are some first-hand tips to play the game right.
1. Prepare yourself
Prepare yourself for the market by identifying the stocks which you wish to trade. Draw your inference not only on their current performance but also their potential in the coming times. You can also talk to market experts to get a clearer picture of these stocks.
Markets depend on many factors. So, if you want to deal in the market then you have to keep abreast of the latest news and events. Apart from industry news, you should also be aware of the economic policies, changes in socioeconomic policies, and just about any developments which might affect the market. You also should know about the basic trading process and the interest rates. Remember that a solid research will help you to chart a course for success in the vast stock market, so do your homework properly.
You need to set up a trading account to buy and sell in the stock market. You also need to assess how much of this fund you are willing to invest in each trade. Successful day traders typically risk less than 1% to 2% of their account per trade.
You also need to set aside a contingency fund which will come in handy when you lose.
2. Have a plan
You need to form a strategy or a plan about how to operate. You can start by observing the market and looking out for trends and time them. It is better if you plan to be realistic and cut down on the losses for long-term profitability than striking a deal that will make you rich overnight.
You should also be able to invest your time as day trading is done over a day and you will need to track the market continuously and spot opportunities. These can happen at any time of the trading hours. The key lies in moving quickly and seizing the opportunity.
Successful traders move fast, but they have their plan and stick to that plan. You must develop and stick to your strategy rather than chase profits.
3. Start Small
In the beginning, focus on one or two stocks. This process will help you to track them and spot trading opportunities easily. You can also take advantage of the fractional shares and trade in a specific and smaller amount of money.
This doesn’t mean that you will always look at low prices and cheap deals. These often feature stocks that cannot be easily and readily sold without a considerable loss in value.
You can also try to stick to limit orders than market orders in the beginning. Limit orders guarantee the price as opposed to market orders, which are executed at the best price but without any guarantee on the price. Limit orders might not look very lucrative but they can cover your losses while you understand the market.
4. Keep your calm
You should understand that you cannot win every time. Most successful traders lose 50%-60% of their trades. But the key is not to get frustrated as there will be times when the markets will test your nerves. You need to stick to your plan or modify them according to the market and take decisions based on logic and reason and not greed or fear
Day trading has become an interesting profession and you need to treat this seriously as any other profession and spend time to understand it. Remember that you need to ‘plan your trade and then trade your plan’ in time to be successful.