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Day Trading 101: Tips for Starting Out

If you’ve decided to dip your toe into the waters of day trading, you may be wondering what you can do to improve your gain. If you’re not careful, you could lose your investment rather quickly. Reading and researching are two of the best ways to help you understand trading and find strategies that will turn a profit. Let’s look at some of the best day trading 101 tips for beginners who are just starting out.

Start Small and Stick to Excellent Opportunities.

It can be tempting to make as many trades as possible when you first start out with day trading. That’s actually counter-intuitive since most trades tend not to be profitable. Most day traders follow an 80/20 rule, where 20% of trades are profitable enough to pay for the rest. Make sure the day trading strategy you’re employing gives you a good set up. Always be critical of where you choose to place your money and never put more than 1% of your total account value on one trade.

Educate Yourself About Day Trading.

If you are new to the field of investing, you should be absorbing knowledge like a sponge. If you’re getting into day trading because you think it is an easy way to strike it rich, you should stop now and cut your losses. Day trading requires a serious commitment to finding strategies around your chosen stocks. That requires time, dedication, research, and strategy. Day trading is not a get rich quick scheme, so don’t treat it like one.

Trading Strategies Are Important

Establishing a day trading strategy and following through will help you establish a pattern of smooth trades. Practice your trading strategies through back testing and paper money accounts before you commit to your real accounts. This will help you learn whether your strategies are successful or not without placing real money on the line.

Find A Mentor

An experienced day trader who is willing to answer questions for you is one of the most valuable assets you can find. Practicing under a master trader is one of the best ways to find a trading style that suits you. Find someone whose risk management and investment style are similar to yours and be willing to listen to their advice.

Stay on Top of News

One of the downsides of being a day trader is how much of a time commitment is needed. Even beyond staring at charts all day, you will need to be on top of all stock-related news. News can impact the direction of stocks that are related to others, which makes it hard to stay on top of the news. Keep an RSS feed going to help you filter through news headlines quickly.

Keep it Simple

Day trading can be complicated, but you should try not to overcomplicated and keep it simple. Find one method or strategy that works for you and follow it. If you find out the strategy isn’t for you, don’t be afraid to abandon it and try something new.