Tips For Novice Day Traders

Tips For Novice Day Traders

Day trading refers to the practice of buying and selling stocks, futures, or other financial instruments within a single day. In the past, only professional stock brokers could make trades, but the advent of online trading and changes to rules regarding brokerage fees have made the practice accessible to amateurs. Compared with longer-term investing, day trading involves higher risks and potentially higher rewards. The following are some tips for beginners who want to explore the possibilities of day trading.

Choose A Market To Invest In

Most successful day traders choose their markets based on the amount of money they have to invest and their own interests. Some markets, like the foreign exchange and certain futures markets, are fairly easy to get into, requiring less than $1000. The equities market, on the other hand, requires an initial investment of $25,000. Personal interests play a role as well because day traders are more successful when they understand their market.

Get The Right Equipment

Day traders need a personal computer and reliable internet connection, of course, and they will also need to download software. In some cases, brokers provide proprietary software for executing trades, but there are also independent software vendors that sell a variety of products designed to chart data and make trades.

Practice First

As with any skill, practice improves performance. One way to practice day trading is to set up a demo account on one of the trading platforms and practice trading in real time. Some also allow users to replay a previous day in order to test different strategies. Getting plenty of practice helps to hone strategies and build confidence before diving in to the live market.

Be Consistent

Each market has its own peak time for trading; in many cases, the best hours for trading are just after the market opens and just before it closes. Most successful day traders choose only certain hours of the day to trade and remain faithful to those hours.

Set A Stop Loss

Day traders can win big, but they can also lose big. Smart traders minimize their losses by setting a stop loss each day. Experts recommend a 1% daily loss limit or a limit that is equal to an average winning day. To learn about one highly successful day trader, see Markus Heitkoetter’s LinkedIn profile.