There was a time where only some people were able to trade actively on the stock market those were people of large financial institutions, brokerages and trading houses. As time developed with technological advancement day trading became a profession for more people than passion and thus this article day trading for beginners.
In this article, we will look out what are the things that are to be considered while starting as a day trader in the market. Before continuing you should know first how the stock market works check out my article here.
Table of Contents
What is Day Trading?
Day trading can be a very lucrative career as long as a person could do it properly and it can be very challenging at the same time, but it can be worked out by following proper risk management, proper strategy, selection of stock and many other things.
As the name suggests day trading or intraday trading means buying and selling of stocks on the same day, that can range from seconds to holding the stocks for whole day
Who should day trade?
If you are studying this article this means that you are serious about day trading, but does that style suit your personality. Some people may have a suitable talent for trading than others.
If somehow your personality doesn’t match your trading style, you can end up in a risky situation.
For Example,
if your style is to move at a slow movement of the price, you may not be suited for day trading. You will be better suited to swing trading. Basically, you need to understand your trading time frame personality, which you have to learn it yourself.
How to Start Day Trading?
Knowledge
As a new trader you should have a proper knowledge of the market of how it works and how it behaves. Technical Analysis and chart reading are the basic skill that are required for a day trader, without its proper understanding individuals would lose money.
Market
You would need a market that you need to focus on that would be currency market, equity market or any other type. Most new trader should look for is that the market he is choosing should have a good liquidity and volatility to enter and exit with ease.
That most depends on the stock selection you can visit my daily recommendations page if you are interested trading in Indian market
Sufficient capital
One of the most important factors to look for is that while starting out you should have sufficient amount of capital that would yield out a significant amount of return over a period of time.
Most expert’s advice that while funding your account, you should only invest that you can afford to lose and while funding you should do it repeatedly to achieve enormous returns.
Trading Account
You would need a trading account for trading, that you could get from a broker or discount broker houses for a certain fee. It would also be used for charting purposes and analyzing your day trading strategies.
Strategy
Every trader needs and has a different strategy to gain an edge over the market. Strategy types may vary from Swing Trading, Arbitrage, Trading news, etc.
Each strategy defines the personality of a person and the risk that an individual is ready to take for a particular trade. Most experts believe that you should not risk more than 2% of your capital.
Discipline
It is one of the most important factors or the important factor of the most stated above because you will need a sheer discipline while starting as a trader as there will be times when the probability of success would not be on your side or you’re just going through losing streaks.
Discipline is the thing that will reward you over a large period of time. In a manner, you have to create yourself day trading rules to bring discipline in yourself.
Business Mindset
While trading you should treat it like a business, as your trading account would go from ups and downs like a real business, you should be prepared for that.
For Example,
If there are 20 trading days in a month you can’t expect to win to 20 days straight, you may lose 10 days and win 10 days or you may lose for 13 days and win 7 days.
The point is that you should analyze it every month to end on a profitable note.
Paper Trading
Paper Trading is a safe way for the beginners is to test out their strategies, risk management and their abilities before stepping in the real market. It would help to analyze the flaws in the particular system that could be solved.
Advantages of day trading
- There is no overnight risk so that the news and events after the market hours would not affect your position.
- The rate of return can be very pleasing if the process of risk and money management is done right.
- You can take advantage of leverage or margin on your side to achieve more profit with less capital.
- Most widely used you can work from home and at your comfort.
Disadvantages of day trading
- There is a very high risk of losing money and wealth in the process if not done correctly.
- The inability to deal with the losses and stress of it can lead a person to great danger.
- Needs great ability to stick with the rules and follow it through the end.
- Needs a complete understanding of trading strategies and technical analysis.
- It will require an ample amount of time which cannot be done simultaneously.
The Bottom Line
Day trading mostly became famous for the kind of living that it provides that you can earn from home or anywhere you want and you can say that you are “day trading for a living” at your own terms, but that’s not the whole truth. Every component day traders, both individual and institutional play an important role by keeping the market liquid and volatile. As a new trader, you should be prepared for these things.
I hope this article “Day Trading for Beginners” helped you a lot please share this article with your peers if you found informative and follow me…
July 21, 2020 at 5:14 am
Like!! Thank you for publishing this awesome article.