Day trading: The basic how’s and what’s every newbie day trader should know

By Charlie Brown:

During day trading, the investor buys and sells the stocks multiple times per day to leverage the small volatilities of the pricing of the assets. Becoming a day trader is a lucrative career opportunity for many job holders and freelancers. Since it does not involve a physical location or time-bound activities, day trading is rapidly growing in popularity as a career option for the youth of the country.

Beginners should remember that all liquid stocks are suitable for day trading since they are cheaper than the other stocks. The most suited stocks for day-trading include the ones that exhibit higher levels of volatility. Day trading is especially popular due to its high flexibility and accessibility. Several brokerages allow day trading, and you can conduct it from virtually anywhere, including your home or the gym sauna. It is a lucrative career opportunity for new traders, who want to adopt day trading as their primary career option.

How should you trade?

Learning to day trade is not as tricky as many make it out to be. When you have the right sources of information, experienced guide and expert advice to fall back on, day trading can quickly turn into your money-making vocation.

Here are six actionable tips from the most prosperous day traders –

i. Forget emotional attachment to stocks

While day trading, it is impractical to become attached to a particular stock. The only way to master day trading is by observing the patterns in the price fluctuations of the stocks using objective technical analysis. For example – when you make $1000 one day by trading Apple stocks (NVDA), don’t become attached to it. The next day, some lesser-known stocks might bring you a fortune that you may have never expected.

Similarly, there is no need to believe that a particular stock bears a curse since it has cost you hundreds or thousands of dollars.

ii. Trade with “disposable” money

Begin day trading with money you can afford to lose. It is essential to consider potential losses, even before you take your first step. It is the only way you can restrict the amount you invest.

Never indulge more than you can afford to lose. Keep the money for utility bills, medical expenses, and other family costs aside before you invest. Considering the probability of loss is not pessimistic; it is practical strategizing.

iii. Take small steps

No matter which stocks you choose, you should always take small steps while beginning. A common mistake for novice day traders is to bite off more than they can chew. Investing too much in a single stock can cause significant losses if there’s a depreciation in the prices.

It is imperative for all traders to keep tight control over their investments until they have grasped the patterns of market pricing. Until you have an understanding of recuperating the losses, you should not think about more significant investments.

iv. Keep a backup

Day trading is not something you pick up while browsing social media. It is complex, and it demands dedicated practice. Without the correct training and knowledge, people can lose thousands of dollars by investing in the wrong stocks or picking the wrong time of the day to trade. Unless you have an experienced trader guiding you with their years’ of practice and market-based knowledge, it is in your best interest to maintain your day job. The only time you can think about quitting your day job is when you complete a dedicated day trading course that provides with hands-on training in trading. Visit Trade Pro Academy to learn more about the different aspects of trading.

Next, in the chapter of day trading is figuring out what you want to trade. While most newbie traders consider stocks, you should also consider options, futures, currencies, commodities, and bonds for your day trade. What you trade will depend upon your risk appetite and desired trade volume.

What should you trade?

Here’s what you need to keep in mind for creating rewarding security for day trading –

i. Good volume – day traders prefer stocks because they are liquid. They often trade in high volumes. For similar reasons, day traders prefer trading in currencies. They allow the traders to trade in high volumes without much impact on the prices.

ii. A decent level of volatility – when we say “decent,” we mean a degree of volatility that is beneficial for the trader. Avoid too much volatility and ensure that the price fluctuations favor the trader during the times of selling the stock or currency.

iii. Familiarity – day traders need to understand which factors trigger the movement of the prices and what times are the best for trading securities. Learning about the stock you are interested in will help you maintain a decent profit level for days or weeks to come.

iv. Popularity – certain stocks are more popular than the others. Along with popularity amidst the traders, news coverage on corporations also contribute to the skyrocketing prices of the stocks. Newsworthiness can boost the liquidity and volatility of the stocks significantly in the following days or weeks. Keep an eye on trading news and updates to understand which stocks or securities will return the most profit.

These points only cover the tip of the iceberg popularly referred to as “day trading.” After learning about market trends, price fluctuations, and types of securities, the day trader needs to decide on his or her market strategy. It is easy to categorize these strategies of the trade. You may have already heard about swing trading, spread trading, fading, and trend following trading. However, finding the one that suits your needs will take considerable time and astute observation.

Track your day trades, their timings, and profits to find out which strategies will match your trading style. You can talk to experts on online platforms like the Trade Pro Academy to find out how you can test the different approaches and determine the best method within the shortest time.