Day trading is described as buying and selling financial instruments within a single day, or several times in the same day. If played well and a trader knows how to take advantage of tiny price moves, there is money to be made. However, for a newbie, day trading can be dangerous without a strategy.
Here are some helpful strategies for the new day trader that are guaranteed to make you some profits.
1. Seek Knowledge
Knowledge holds a lot of power, and alongside knowing the basic trading processes, a day trader needs to keep updated on the current stock market news that might affect the stock trade, the latest interest rate plans, the state of the economy, etc.
Ensure you do due diligence and make a list of the stocks you wish to trade and keep yourself updated about these companies and the general market as well. Visit financial websites and scan the business news throughout the day.
2. Set aside some funds
Decide how much capital you are willing to put down for each trade. Most successful day traders do not risk more than 1 to 2% of their account for every trade. If you have a $50,000 trading account and are willing to risk 0.5% of the capital per trade, your maximum loss for each trade will be $250 (0.5% *$50,000).
Set aside some extra money you can use for trading and that you are ready to lose. Remember this is might or might not happen situation.
3. Dedicate Time
Day trading needs time, thus its name. You need to dedicate most of your day to trading, and if you have another job and cannot spare the time, do not try to juggle the two. This process needs a trader who has time to track the markets and catch opportunities as soon as they arise, which could be any moment during trading hours. Moving fast is key and seizing these opportunities will make you some profits.
4. Put Limit Orders
Choose which orders between market and limit to use for entering and exiting trades. When a market order is placed, its execution is at the best available price at that point, so you have no price guarantees. A limit order guarantees you the price, but no execution guarantee. A limit order assists you to trade with more accuracy, where you set an executable price for buying and selling.
5. Download MT4
Before you start trading, either look for a reputable stock broker or download Metatrader4 or MT4. Metatrader4 is an online platform used by millions of traders and brokers to effectively trade and keep track of trends and indicators in the market.
6. Start Small
As a newbie, you need to focus on not more than two stocks in a single session. Tracking and spotting opportunities are easier with fewer stocks. Nowadays, you can trade fractional shares, which allows you to specify smaller amounts you would like to invest in. This means if you wish to purchase shares going for $250, and you only wish to invest $50, most brokers will allow you to buy one-fifth of the share.
7. Be Realistic
Your strategy does not have to profit all the time to be considered profitable. Most traders only win between 59 and 60% of their total trades. The trick is to make more on the winning trades that they lose on the losing trades. Ensure you limit the risk per trade to a percentage of your account, and that you have set down your entry ad exit methods in writing.
Day trading is a time-consuming process because you need to keep track of any new changes in the market and capitalize on them. As a newbie, you have to have a strategy that will help you win more than you lose. Look for a reputable broker or a veteran who will guide you as you trade. Remember it is not a guarantee that you will make money, but with patience and diligence, it will pay off eventually.