If you’ve been thinking about beginning day trading, you’re probably aware that there’s a large learning curve- which is something that can put many people off. However, there are some excellent day trading strategies which can teach you the basics and give you a firm grasp of how day trading works and what you need to know.
The first thing you need to understand is what day trading actually is. Day trading is about managing risk, while studying markets and analysing charts. Basically, you’ll be buying shares with the aim to sell those shares at a profit within either minutes or hours.
Since this is a short window of time, you’ll be looking for volatile stocks, which means keeping an eye on the news to keep up to date with what’s happening with the companies you’re interested in. Day traders can choose to trade either with cash or on margin. When trading on margin, you’re actually trading with borrowed money, leveraging your account to make a profit on that borrowed money. The problem with this is that many people fail to manage the risk, which can then cost them everything they have.
So how do you ensure that you’re consistently profiting? The trick is to cap your losses, realise that every trade has a level of risk that is pre-determined, and make sure that you’re following the rules for that trade. Unfortunately, beginners will often change their risk parameters, holding longer than they should when they’re down, and losing far more than they would have if they had simply followed their own rules.
There are a few different day trading strategies, and two of the most popular are the Reversal and Momentum strategies. There are a number of courses available which can teach beginner day traders these strategies, so they can learn what type of stocks they should trade, the best time of the day for trading, how to find the best stocks for trading, setting their stop loss, and finding entry by analysing chart patterns.
The best strategy for you will be the one that matches your level of skill, the time of day you’re available for trading, and your risk management tolerance. Luckily, once you’ve learned the basic skills you can hone them with a simulated trading account to test these skills and learn how to stay cool with the ups and downs of day trading.
Another critical skill for traders, is learning how to scale both in and out of day trades. Newbie traders will often wait when they have winning trades, hoping for an even larger win. This is a mistake as these prices can suddenly drop, ensuring that you lose that lovely profit you’ve worked so hard for. By mastering this method, you’ll have a better success percentage.
As you can see, there are many things you’ll need to learn if you want to be successful at day trading, and these tips are just the tip of the iceberg. If you’re considering day trading, be sure to take a course so you can get advice from the experts.