Novice traders start off day trading with immense energy and enthusiasm. But it burns out rapidly as in most cases, novice traders almost break their banks due to unplanned and non-methodical trading practices. Investing hard-earned money in day trading and making a profit out of it can become an emotional seesaw of winning and losing.
Success in day trading involves not only good fortune, but also persistence, proper planning and patience. Here is a beginners’ guide especially for the day traders.
- Study and learn the subject – As a novice day trader, you must learn the fundamentals and sincerely try to gather more knowledge about the subject. However, that doesn’t mean that you need to invest in any expensive tutorial. All you need is to have a good start on the topic and that is something you can find both in books and online. The more knowledge you have, the better scope you’ll have to take advantage of day trading and also avoid possible traps.
- Trail the leaders – Irrespective of your niche, you must follow a mentor who is adequately equipped with the required expertise and of course more knowledge than you. In this type of trading, your mentor should be someone who knows the market and someone you trust. If you can arrange for a one-to-one guidance at the initial phase, it would be great. However, you can always read about and follow the strategies practiced by your preferred traders.
- Create your plan – To get success as a day trader you should have a systematic plan and a series of strategies irrespective of anything that happens in the market. You must stick to the plan containing certain rules and regulations that you follow in order to monitor particular stocks that you have been watching and those specific conditions under which you may buy or sell a stock. Thus, if you have a good plan with robust stratagems that work consistently, then you’re very likely to succeed in the long run.
- Be slow but steady – As you know ‘slow and steady wins the race’; you shouldn’t hurry but you must try to be consistent. Long-term investors may look for 50 percent return on investment (ROI) annually, but as a day trader you need to concentrate on 10% to 20% on a daily basis. However, you should not rush after returns on investment as that may lead you to trade wrongly. The bottom-line is not to try to be rich overnight, rather try to make small but consistent gains.
- Control your emotions – You must not be so emotional while trading that you invest all your hard-earned dollars into it. Trading should be a mechanical process. Controlling your emotions will help you make the right decision and thus reach success in due course.
- Don’t panic – You must not be fearful about the risks involved in day trading; you should consider this as a part of the trade. One can’t understand the true flavor of profit unless he faces some loss. Like any business day trading also involves some sort of risks that you must encounter in order to get success. Instead of being panicky, you should carefully handle all the perils that come your way. Work your strategy that includes the exit techniques to avoid falling into the risk of losing a chunk of money..
- Procure low and sell high– This is the basic rule for any type of business, but still sometimes the rule is ignored. Price plays the most important role when it comes to trading a stock on a daily basis. When a stock starts taking momentum, you try to grasp it and hold on to let it go higher; then sell it off and grab a profit.
- Know when to fold and walk away – Timing is the key to success in day trading. You must understand when to fold and when to wrap up. You need to focus on minimizing your losses and to make that your master plan. It should include an exit strategy or a set limit that you won’t cross to lessen losses. You may set a stop-loss to control loss.
Discussed above are some of many useful day trading tips. For more info, you can make use of the Internet. On the websites of different companies that perform Search Engine Optimization (SEO) for finance industry may also contain informative posts of stock trading including day trading.
– Sale, Robert (2001). Trading Strategies for Direct Access Trading: Making the Most Out of Your Capital
Sale, Robert (2001). Trading Strategies for Direct Access Trading: Making the Most Out of Your Capital
Author’s Bio – Jonny Pean is a renowned financial advisor. He also works as chief editor for different popular online finance forums and communities.
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