Being a day trader needs a lot of work and effort. It needs your commitment and, more important, tough discipline. That said, there are still helpful ways to overcome the challenges that day trading poses. Here are some useful tips you can use for your journey. Read on!
Knowledge is Power
Aside from knowing the most basic trading processes, you should also know the latest stock market news and events. These include interest rate plans, economic guidance, and other similar things.
One good way to do this is to make a list of the stocks that you want to trade. Keep up with your chosen companies and general markets. Business news outlets and websites will greatly help you with this.
Day Trader must Allocate Some Funds
Determine how much capital you’re willing to risk on each trade. Many successful day traders put less than 1 percent or 2 percent of their trading account at risk every trade.
Put aside an amount of funds that you can trade with. You should also be prepared to lose this amount.
Dedicate Enough Time
Obviously, you need to spend a lot of time doing the trading. In other words, day trading isn’t for you if you don’t have enough time to spare.
Being a day trader means you track the markets and find opportunities. You have to react quickly because opportunities can show themselves quickly and disappear faster.
Start Small
When you’re a beginner, it’s better to start with one or two stocks max per session. Following and finding opportunities is easier when you have fewer stocks per session.
In recent years, more traders are trading fractional shares. That means you can choose specific, smaller dollar amounts that you wish to invest.
Stay Away from Penny Stock
Even though you might want good deals and low prices, you have to veer away from penny stocks. Such stocks are usually illiquid and your chances of succeeding with them are often bleak.
Stocks that trade for lower than $5 per share usually become de-listed from big stock exchanges. You can only trade them on the over-the-counter market.
Day Trader: Time the Trades
Most of the orders that traders place to start to execute as soon as the markets open. This of course spurs volatility in prices. An experienced player may recognize these patterns right off the bat, but newbies almost certainly can’t.
It is better to just read the market without making any moves for 15 to 20 minutes. Middle hours don’t have that much volatility, though. Then, as the closing bell nears, movements start to pick up.
Stick to Your Plan
You have to move fast to react to the market. But you have to have a plan in place—a developed trading strategy. You have to have the discipline to stick to that strategy, too.
You have to prioritize following your strategy instead of just chasing profits. Don’t let emotions get the better of you.
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