All You Need to Know Before you Start Day Trading
Day trading is a high-stress, fast-paced, and highly competitive way to try and make a living, and it’s not for everyone. If you’re thinking about day trading, here are a few things you should know and avoid before you begin.
Don't quit your job just yet
You shouldn’t quit your day job to start day trading. It’s a risky proposition, and it’s best to start small and grow over time. If you do decide to quit, make sure you have enough money saved to cover at least six months of expenses.
Be prepared to lose money.
You need to be prepared to lose money when you start day trading. It’s inevitable that you will have losing trades, and you need to be okay with that. If you can’t handle losing money, then day trading is not for you.
Practice meditation
You need to practice meditation in order to manage your emotions. Emotions play a big role in day trading. If you are in control of your own emotions from the very beginning, your odds of success as a trader are high.
The best traders know what they are doing, and why.
90%
Losers
10%
Brokers and Winners
First and foremost, you need to understand that more than 90 percent of day traders fail. The vast majority of people who attempt day trading end up losing money and quitting. If you don’t have the discipline to take losses quickly and move on, or the capital to absorb multiple losses, then day trading is not for you.
People lose because they blindly follow the herd – There is a difference between being part of the herd and being a sheep. When you are part of the herd, you are following the lead of others who are more experienced than you. When you are a sheep, you are blindly following what everyone else is doing without any thought or understanding.
A firm understanding of the stock market and how it works is a must. You need to know what stocks are, how they’re traded, and the different types of orders you can place. Most importantly, you need to know how to read a stock chart. If you can’t read a stock chart, you’re not going to be a successful day trader.
Scalping is a type of day trading that involves taking quick, small profits on a regular basis. Scalpers typically hold their securities for only a few minutes or even seconds. The goal of scalping is to make small, consistent profits. While scalpers can make a decent amount of money, they also face a higher risk of losing money.
Day trading gives you greater control over your trades. As you are holding your positions for a short period of time, you can make decisions quickly and react to market changes immediately. If you don’t like the direction a trade is going, you can get out quickly and limit your losses. Furthermore, you have the potential to make a greater profit on your winning trades as you are able to capitalize on short-term market movements. Unlike other types of trading, you are not handcuffed to your positions.
Position trading is a style of trading that involves holding onto a security for a long period of time. Traders who position trade may hold a security for months or even years. The goal of position trading is to profit from the overall movement of the market, rather than from the day-to-day price swings. While position trading can be a profitable way to trade, it also comes with a certain amount of risks.
Day trading gives you greater control over your trades. As you are holding your positions for a short period of time, you can make decisions quickly and react to market changes immediately. If you don’t like the direction a trade is going, you can get out quickly and limit your losses. Furthermore, you have the potential to make a greater profit on your winning trades as you are able to capitalize on short-term market movements. Unlike other types of trading, you are not handcuffed to your positions.
Swing trading is another popular trading style. Unlike day trading, swing trading can involve holding on to securities for more than one day. Traders who swing trade may hold onto their securities for days, weeks, or even months. The goal of swing trading is to profit from the price swings that occur over a longer period of time. Like day trading, swing trading also comes with its own set of risks.
Day trading gives you greater control over your trades. As you are holding your positions for a short period of time, you can make decisions quickly and react to market changes immediately. If you don’t like the direction a trade is going, you can get out quickly and limit your losses. Furthermore, you have the potential to make a greater profit on your winning trades as you are able to capitalize on short-term market movements. Unlike other types of trading, you are not handcuffed to your positions.
Now that you know what day trading is (buying and selling securities within the same day), the following steps will outline a process to start day trading.
1. Choose an online broker – In order to start trading, you will need to open an account with an online broker. When selecting a broker, be sure to compare fees, account minimums, and the types of securities they allow you to trade.
2. Learn the basics – Before you start trading with real money, it is important to learn the basics of day trading. This includes understanding different order types, reading charts, and knowing how to manage risk.
3. Develop a strategy – Once you have a good understanding of the basics, you can begin to develop a trading strategy. This should include when you will enter and exit trades, what types of securities you will trade, and how you will manage your risk.
4. Paper trade – Once you have developed a trading strategy, it is important to test it out before using real money. This can be done by paper trading, which is essentially simulating trades with fake money.
5. Start small – When you are ready to start trading with real money, it is important to start small. This means only investing a small amount of money in each trade. As you become more comfortable with trading, you can start to increase the amount of money you invest.
6. Keep a journal – A journal is a great way to track your progress as a trader. Every day, you should write down the trades you made, why you made them, and how they performed. This will help you to learn from your mistakes and also track your progress over time.
7. Review your journal – At the end of each week, month, or year, review your journal to see how you are doing. This will help you to identify any areas where you need to improve.