For so many people, day trading is increasingly becoming a popular way to make money on the side. As a matter of fact, scores of people have made a fortune from day-trading as their main sources of income.
All the same, being successful at this venture requires several things. Apart from having a risk-taking mentality, you will also need to be strategic and well informed so you can make wise trading decisions.
Most importantly, it helps to acquire a few tips from experts and some of the most successful traders. This way, you can minimize your risks and maximize returns from your investments.
Smart traders will want a diverse range of tips, including tips on stocks, market predictions, tax, money management, psychology, and everything in between.
As a beginner in day trading, expert tips will help you avoid the common mistakes made by newbies in the game, which often end up costing them a fortune. The following are a few dos and don’ts of day trading you might want to know according to the experts.
1. Start Small
As a beginner in day trading, you will want to restrict yourself to just one or two stocks a session. A limited number of stocks can be easily manageable. Investing in small cash quantities has over the years proven to be the most effective way of making the most profits.
Furthermore, the larger the risk, the more money you put into a single session. You wouldn’t want to lose a fortune overnight, right?
2. Stay Updated
When getting started with day trading, the first and most important thing you need to do is arm yourself with as much basic info as possible. In addition to this, however, you will need to stay up to date with the newest stock market news and happenings that affect equities.
Keeping yourself up to date on the stocks you want to trade so you can make informed decisions right away is very crucial for your success in the business.
3. Embrace Technology to Trend-Trade
As with most other markets, embracing technology is one of the best ways to reap big from day-trading. The good thing is that there are numerous tools out there that can help you study and predict market movements while staying up-to-date with the market. The indicator helps you invest in a trending market and profit from it without much frustration. It shows you the current trend direction so you can make informed decisions when day-trading.
4. Set Aside Trading Funds from the Rest of Your Money
Trading is inherently risky. There are both losses and profits to be expected in any transaction. This is why you should be cautious about how much money you put into it.
While the first deal you make will be with your capital, it is advisable to ensure that you recover that money before reinvesting your winnings. This way, you’ll be working solely with the profits. Most importantly, always have a set amount and a maximum limit you can invest per day or per trade.
5. Follow the Plan You Have In Place
Any day trading expert will tell you for free that while you need to always act fast, take your time to think about every step you intend to make. This is because they already have a trading strategy in place to guide them.
The more disciplined you are about sticking to your plan, the likelier you are to benefit from this activity. It’s best to plan your transaction first before you execute it. You can also work with various trade execution services which will implement your trading strategy, and help you stick to your plan by removing friction.
If you are not well informed, mistakes are highly likely during trades. Below are some things you shouldn’t do when day trading.
1. Don’t Trade Without a Solid Plan
Day trading is all about making quick, calculated decisions that reduce your chance of loss while increasing your return potential. That is why the first rule of success in day trading is to make a plan and adhere to it. Take the time to learn about trading strategies and market patterns, and then utilize that knowledge to create a strategy.
2. Don’t Risk Too Much
Experienced traders have no problem trading with as much as they want. However, as a newbie, you should not take on more risk than you can afford at the time. Risking more than you can afford to lose will quickly destroy your day trading business. Now is the time to protect your money, so you can be better prepared for any future losses.
3. Avoid Going for Hot Trades
It’s no secret that heated trade transactions can make or break your business. However, it’s preferable to keep them at bay until you’ve proven yourself to be an expert. Stocks that have a lot of momentum are more volatile on the market and are more likely to stall, than fall—and you don’t want your money to get caught in the middle.
While some luck is required in day trading, it takes a lot more than that to achieve success. It involves putting some effort into staying updated, making calculated risks, and having a winning strategy. If success is what you are eyeing, the above are a few things you should and should not do as a day trader.