Day trading is a lucrative game of buying and selling a given financial instrument in just a single day. This act can be done several times within the same day as one tries to take advantage of any opportunities and small price moves. To avoid any disappointments, whether you are new to it or a veteran, it’s important to use a well thought-out method. There are many strategies and tips that you can use in order to achieve best results. This article will cover the day trading tips and strategies that will help you move from being a novice to a pro trader. The list is discussed below.
Solicit For the Best Knowledge
As the saying goes, “knowledge is power.” there is no doubt to this aspect. You need to get vast knowledge about the latest stock market events and news that directly affects stocks. Consider researching about the economic outlook, Fed’s plans for interest rates among other aspects. You can only get reliable information from reliable financial websites and known business newspapers. Ensure your search is regular and prices. This means, you have to make a list of all the stocks you are interested in and then research not only about the general market but also selected companies.
Come Up With a Realistic Budget
Any financial business or game needs planning. Determine the exact amount you can comfortably risk per trade and set aside this amount. It’s advisable to keep it between 1% and 2% of your account per trade. Prepare and determine another surplus amount that you are not only willing to use for your trading, but also prepared to lose in case of any eventuality. With this, you will avoid making the mistake of not being able to meet your basic needs just because a trade went sour.
Consider the Time
Time in itself is an investment and day trading will definitely require most of your time during the day. If your time is limited, don’t try this game. Traders that make it in this endeavor usually move (decide) very fast. During trading hours, you have to keenly track the markets and quickly identify any opportunities that arise so you can take advantage of them.
All beginners are advised to stick on just one or two stocks to handle per very trading session. This is because, it’s easier to track and identify opportunities when you are handling fewer stocks compared to when the stocks are so many. Remember a journey of a hundred miles starts with just a single step. Don’t be deceived.
Penny Stocks Should Be Avoided
As much as all you need are lower prices and great deals, penny stocks needs to be avoided like plague. This is because, penny stocks are very illiquid and often, the chances of hitting a great jackpot and so bleak.
Properly Time Those Trades
Remember, many orders that traders and investors place start to execute in the morning; immediately the market opens. It’s this aspect that contributes to price volatility. A pro can easily recognize patters and make appropriate choices that will earn profits. For a beginner, don’t be in any rush, just take the first 15-20 minutes to study the market very well. Movement during the middle trading hours isn’t as volatile but this trend changes and these movements increase towards the closing time. Many rush hours come with many opportunities but beginners are advised to shy away from them.
Cut Losses with Limit Orders
This is where you make a decision on the exact type of orders that you will use while entering or exiting trades. You can either use a market order (one without price guarantee and is executed based on the best price that is actually available at that time) or a limit order (one without the execution but with a price guarantee). In the later, you are fee to set your preferred buying and selling price.
Be Very Realistic About Profits
It’s good to note that most traders only win about 50% to 60% of all their daily trades. This means that all the strategies you use don’t have to always be profitable. Try to lose less on your losers and make much more on your winners. To achieve this, ensure that any risk on every trade is being limited to a very specific percentage of the amount on your account. Also, this has to be done based on your written down exit and entry methods.
Stock markets can really test your nerves at time. The bottom line is to always stay cool. Ensure that all the decisions that you are making are being governed only by logic and not any emotions.
Adhere to Your Plan
Though fast movement is key in this game, fast think isn’t mandatory. Develop a reliable trading strategy before you begin. Ensure you also set the discipline that you must hold on your set strategy. Basically, staying focused on strategy is much more important than constantly chasing profits.
Following the above day trading tips will help you grow into a pro trader. You will surely earn great from being a day trader.