Why is day trading considered so controversial in the online stock trading community? Day trading is probably one of the most misunderstood and argued topics on Wall Street today. Many professionals and money managers do not believe the benefits outweigh the risks for this type of online stock trading strategy and most discourage it.
However, there are many that do it and claim that there is a great profit to be made if you know what you are doing. Day trading is another online stock trading strategy that must be planned, studied and enacted with the same care as any other strategy and even with that, the unpredictable happens and there is risk involved.
So how does day trading work anyway? There are many day traders that play the market as a bit of a gamble. There are big wins but they come with big losses. However, there are some knowledgeable day traders that make a very decent living from it. However, with the right knowledge and experience in the marketplace, sufficient capital and a proper strategy, you may be able to make a significant amount of money with this type of trading.
A successful strategy in day trading is one that gives you a competitive edge over the other traders. With day traders, some successful strategies are swing trading and arbitrage. With discipline and the right knowledge, you may be successful at day trading.
When the markets get real jittery, they will range up and down like lightening because they are being driven by day traders. They will place bets across all timeframes including daily so bounces can go on for days in what looks like a recovery before it crashes again. The computer program trades will go with them adding fuel to the fire. In any case, trying to day trade these markets can be very rewarding but requires a particular personality.
You may have been attracted to spread betting by all the perceived advantages, but when you are day trading your account, you need to watch out for some important issues. Firstly, you know that spread betting does not require commissions, which is a good thing, but your broker makes his money from the spread between the buy and the ask price. You should shop around to find the broker offering the best spreads, which is the least difference between the two prices. Anyway, trading shares is easier than day-trading if you find it easier and harder if you find it harder.
When you are day trading, you need to have action. Spread betting on a price which is meandering sideways is bound to hurt your account because of the spread, and some markets go sideways more than half the time. Look for the trend, either up or down, and trade with it.
If you feel good about your trades, continue, if not it is okay to stop trading for that day. Many traders prefer to buy, or go long, looking for an increase in price, so short positions are taken less frequently.
But prices can drop more rapidly than they rise, so it is a mistake to not include in your arsenal the possibility of profiting from selling. Stick to your plan. You may have just seconds or minutes to make your trade, and if your system is researched and proven, following it will bring you success.
This does not mean that you should expect all trades to succeed. One of the keys to successful trading is not to sit on a losing position, but to cut your losses. This can be hard to do, as some people feel it is admitting they were wrong in entering a trade, when in fact the wrong thing would be staying in the trade. The second part of money management is sizing your positions.
You can easily see how much to risk from determining at what price you will cut your losses if the trade goes bad. If you risk more than this, a run of losses can cripple your account. If day trading is high risk — pyramid day trading is super high risk, and for that reason your pyramid trades are best left for the end of the month when your account is healthily in the black.
If you eventually pyramid trade you must take partial profits if using a trailing stop or all profits if you have a target. Taking all profits on a target and walking away without looking back is very hard to do if you are used to using a trailing stop such as a moving average. The third mistake in money management is to cash out a winning position too quickly. The corollary of cutting your losses is to let your winners run, and this is the way you make money even with the same number of winners and losers.
If you are concerned about a retracement, consider exiting half your position and leaving the rest to gain future profits. Finally keep in mind that day trading is an intense occupation, and demands full attention at all times.
Lead with facts — Make sure your strategy is based on, supported and backtested with facts. Humans are emotional beings and after a big win today you may be feeling abnormally brave when the markets open tomorrow morning. Let facts and figures guide your decision-making processes. Stick only to the entry and exit parameters in your plan. Maintain discipline and your bottom line will thank you for it.
Instead, focus on sticking to your strategy and let your strategy focus on making you money. Take responsibility — Too many traders lose and then proclaim the market was out for them. Whatever happens, point the finger at yourself, in a constructive way. What did you do wrong? How can you stop it happening again? Do you need to amend your trading plan? Keep a trade journal — Keeping a record of previous trades is an invaluable tip. Software now enables you to quickly and easily store all your trade history, from entry and exit to price and volume.
You can use the information to identify problems and amend your strategy, enabling you to make intelligent decisions in future. You never meet a trader who regrets keeping a trading journal. Go back to the drawing board and think again. Here are a few of the recommended brokers in your location:.
As an aspiring trader, you may know some of the basics and have a decent idea of what you want to trade. Fortunately, we have collated the essential tips for beginners. Every market is different, bringing with them their own benefits and drawbacks.
So one of the first questions to answer is; how much capital do you have? One of the best tips on day trading for beginners is to stick to one market to start with. Instead learn in-depth about one market, practice, learn from your mistakes, get good, and then consider adding another string to your trading bow.
Devoting your time and energy into one market will help you maximise profits and minimise losses whilst you find your feet. Before you can start buying and selling Amazon and Google shares you need to ensure you have the basics.
Those basics include:. Whilst some day traders are tuned in every day from to EST for the U. S stock market , many trade for just a hour window instead. As a beginner especially this will prevent you making careless mistakes as your brain drops down a couple of gears when your concentration wanes. An essential beginners tip is to practice with a demo account first. They are also a fantastic place to get familiar with platforms, market conditions, and technical analysis. What have you got to lose?
Utilising these beginners day trading tips will give you the best chance of succeeding when you take your first trading steps. Fear, greed, and ambition are three of the most prevalent and potentially dangerous emotions. Fortunately, we have listed the top psychology tips to help you keep a level head. Are there any day trading tips for gold though?
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