10 Basic Tips for Day Trading

10 Basic Tips for Day Trading

Day trading can be an extremely stressful hobby, and it’s all too easy to go from making profits to losing your shirt (and then some). If you’re going to try your hand at day trading, it’s crucial to develop strategies that will help you survive in the cutthroat world of the stock market. According to tastytrade, “Day trading is the opening and closing of your trading positions within a short period, typically the same day. Also known as intraday trading, the goal of using this trading style is usually to take small profits which eventually add up to bigger gains over time.” Here are ten day-trading tips you can use to help make sure you don’t lose all your money.

 

1) Choose the Best Platform

 

The best platform for your day-trading needs depends on your trading style. If you’re a more aggressive trader, a site like Interactive Brokers may be best. For those new to trading or making small, frequent trades, an online discount broker such as TD Ameritrade might make sense.

 

2) What Are the Day-Trading Hours?

 

The stock market is open Monday through Friday, from 9:30 a.m. to 4 p.m. EST (New York time), with a short break each day between 12:30 and 1 p.m. A few exchanges trade on Saturdays as well. If you plan to be active during these hours, you must have access to news services and investment tools.

 

3) Set Your Objectives Clearly

 

Before starting, you need to know what you want from day trading and when it will happen. After defining your goals, make sure that every action you take is in line with those objectives. Without them, you’ll have no idea how well you’re doing or where you can improve. Objective-setting also improves discipline by helping keep you focused on what needs to be done rather than getting distracted by unimportant things.

 

4) Do Your Homework – Know Your Product

 

The first step in successful trading is that you must know your product. If you don’t know what you are buying and selling, how can you make decisions about when to buy or sell? At a minimum, before engaging in any trade of any type, you should have at least an elementary knowledge of exactly what it is that you’re purchasing. What does it represent? How will it fit into my portfolio/portfolio strategy?

 

5) Go With a Broker Who Can Serve Your Needs

 

The right broker is an essential part of your day-trading success. Look for a broker who offers lower commissions, a good selection of markets and securities, one-on-one training sessions, and good customer service.

 

6) Don’t Lose Money by Trading When You Don’t Have to

 

Keep in mind that if you’re trading with money you can afford to lose, then it’s not a real loss. If you trade with money that you cannot afford to lose, and you lose, it’s a real loss. Try your best to develop discipline around saving enough to put yourself at risk for a real loss.

 

7) If You Must Day Trade, Do It With Money You Can Afford to Lose

 

If you’re going to day trade, you should never risk more than 5% of your net worth. When it comes down to it, there is always a risk that comes with being involved in any type of trading. However, if you are careful and aware of what is happening within each account, there is less chance that something will go wrong.

 

 

8) Beware of Chart Patterns That Are Bullish and Bearish at the Same Time

 

Some market pundits like to talk about bullish and bearish chart patterns, but not all chart patterns are either. Some may be both at once. How can that be? For example, consider an M bottom pattern. It is a bearish pattern, defined by lower highs and lower lows. However, it also contains upward price action representative of bull trends.

 

9) Know When You Need Professional Help

 

If you’re trying to get started with day-trading, make sure you consult a professional before you start.

 

10) Keep a Cool Head

 

Emotions will always play a part in trading, but if you’re going to make money from it, you need to keep them under control.

 

There’s no magic day-trading formula that works for everyone. However, there are a lot of things you need to know before diving in. Understand how stock markets work, and most importantly, understand yourself.