DAY TRADING FOR BEGINNERS
Are you the kind of trader who does not have the patience to wait for days or weeks to find the most profitable trades? If yes, then day trading might be the one for you. Day trading is a short-term trading style in which a trader buys or sells a financial instrument within a single day. It is a fast-paced trading style that involves opening and closing positions before the market closes.
However, day trading is not as easy as it sounds. You must have sufficient knowledge about the basics and the ins and outs of trading to know what is happening in the market. The goal of day trading is to make profitable trades by taking advantage of small price movements. Since this trading style is fast-paced, you should also be quick on your feet when making decisions. Taking too long to decide may result in missing good opportunities. As a beginner, studying and practicing is the best way to start your day trading journey.
What Is The Best Strategy For Day Trading?
Even if you have learned the basics of day trading, your trading sessions would never be productive unless you incorporate a good strategy in your trading plan. Every trader has their own strategy that they implement and it depends on their personality and how they day trade. You can craft your own strategy which would take a long time or you could adopt an existing trading strategy.
There is no single trading strategy that can be considered as the best for day trading. Every strategy has a different approach so it is up to the trader to find out what suits their trading plan. Once you have chosen a strategy, it is best to practice implementing using a demo account for at least three months to find out whether it is profitable for you. Changing strategies just because it does not work the first few times is not a wise move and will only serve as a hindrance.
Below are some of the popular day strategies:
Scalping – strategy where the trader makes numerous trades in hopes to gain small profits from small price changes throughout the day
Reverse trading – also known as pullback trading where the trader looks for any reversal in trends
Trend following – strategy where the trader makes trades based on the trend or momentum of a financial instrument
Range trading – strategy where the trader uses support and resistance levels to make trading decisions
Price action trading – strategy where the trader monitors the price movements in the market
News-based trading – strategy where trades are based on news that increase an asset’s volatility and volume
High-frequency or algorithmic trading – strategy where the trades uses an algorithm to execute trades based on a set parameters
What Is The Easiest Day Trading Strategy?
Truthfully, there is no easiest day trading strategy that fits everyone. As mentioned before, the effectiveness of a trading strategy varies from one trader to another. The difficulty of the strategy also depends on several factors such as the trader’s experience, trading plan, and personal goals.
However, some strategies require technical indicators that can be overwhelming for beginners. For starters, they could start with simple strategies such as monitoring trends and price movements since they are both straightforward in their approaches. As time goes by, you will already have the necessary knowledge and experience to give more complex strategies a shot.
Can You Start Day Trading With $1000?
Yes, it is possible to start day trading with $1000 in your trading account. There are certain futures markets that you can trade with that amount usually based on commodities or indexes such as S&P 500, crude oil, or gold. In fact, traders can even start day trading with $50 in the forex market.
However, while you can day trade with a relatively lower amount, it does not mean that you should go for it. For example, when trading in the forex market, traders are advised not to risk more than 1% of their capital. Therefore, if you have $1000 in your trading account, you should only risk $10 per trade. This means that you can trade 1 standard lot ($10/lot), 10 mini lots ($1/lot), 100 micro-lots ($0.10/lot), or you could buy multiple lots as long as you do not go higher than your risk limit.
Starting with $1000 in your trading account gives you more potential income unlike starting with $50. However, a higher amount would give more flexibility in managing your trades. When it comes to deciding how much capital you should have beforehand, factors such as risk management and stop-loss orders should always be considered.
How Many Hours A Day Do Day Traders Work?
Day traders work differently from one another. Although, most day traders allot 2 to 5 hours per day. Aside from actual trading, they would also spend time preparing beforehand and reviewing their trades for the day. The trading time will vary from one person to another and it depends on their personal goals and their trading strategy. There are also day traders who set a profit target to which they stop trading once they hit it.
Can I Make A Living Day Trading?
Yes, it is possible to make a living off of day trading but it is going to be a long journey. It will take months or even years to gain substantial profits from day trading. Many beginner traders often mistake day trading as an easy way to make money but it is the complete opposite. Do not expect that you would already have results in just one day. You might make a profit from one trade but you can also easily lose it on the next one. This is the reason why aspiring day traders should keep their expectations low and keep practicing instead.
Once you get the hang of day trading, you can be consistent in making profits and keep your losses at a minimum. Patience is an important virtue when talking about day trading. By continuously studying and practicing, you will get the much-needed experience that will help you become successful in day trading.
HOW TO DAY TRADE
1. Understand the basics. Knowledge is power when it comes to day trading. You need to know the basic procedures and how the market works. It is also helpful to read about current events and business news.
2. Set aside money and time. Most importantly, set aside money that you are willing to risk. Make sure that you can afford to lose the capital you are planning to start with. You will also need to dedicate time to day trade.
3. Develop your trading strategy. A good strategy is the backbone of a successful trading. Read about the different strategies and try to adapt them in your trading plan.
4. Start small. It might be tempting to make numerous trades once you start but starting small is the best way to find more opportunities and minimize losses.
5. Adopt a risk management system. A trading strategy is not complete without a risk management system. Having good money management will allow you to trade regularly without getting broke.
6. Time your trades. Expert traders may already find profitable trades as soon as the market opens, but for newbies, it is recommended to start trading when the market is less volatile to have a better understanding of the market and find more opportunities.
7. Keep it simple and stick to the plan. As a new trader, you should not complicate your trading activity. You need to be focused when you day trade and you cannot do that if you feel overwhelmed. Your trading plan should be your only guide when day trading and you have to follow it until the end. Discipline is a critical factor when it comes to your success.
How Many Trades Do Day Traders Make A Day?
The amount of trades day traders make in a day highly depends on their trading strategies. A great strategy helps a day trader determine the best times to enter and exit trades. If a day trader’s strategy is aimed at taking profits during the market opening, he could easily make 1 to 4 trades as the opening is very volatile, meaning many opportunities may be profitable. Scalpers, on the other hand, can make up to a hundred trades in a day.
The trading strategy will dictate how many trades you can make. Your strategy must adapt to various market conditions that affect its volatility. Developing and practicing your strategy will give you an insight into how much you can trade.
Why Do Day Traders Fail?
One of the reasons why day traders fail is their lack of knowledge. Some traders would often dive in without preparing beforehand, thinking that day trading is easy just because it can only be done in a day or less. They do not realize that having a well-thought-out plan is a must when it comes to this trading style. Some traders also have not yet polished their analysis skills that are needed in day trading.
Having high expectations is another reason why most day traders fail. Many traders think that they could already earn a huge amount of money in one day. Losing trades is as easy as making a profit from them. Emotions play a big role in the success of a trader. If he starts losing trades, he might get frustrated and end up losing more money than he intended.
If there is a chance that a trader makes a profit, greed can also be a reason for his downfall. Thinking that luck is on his side, he might continue placing trades without careful evaluation. Lack of discipline is another cause of failure. When a trader does not follow his trading plan, expect to encounter problems that may lead to losing money.
SUCCESSFUL INTRADAY TRADING STRATEGIES
Intraday strategies are hinged on speed and timing accuracy since traders make short-term trades usually in just seconds or a few minutes. Most effective strategies rely on technical analysis, charts, and indicators to predict price movements and spot profitable trades. But whether you are a beginner or an advanced trader, a great strategy should take into account three essential components: liquidity, volume, and volatility.
Some of the most profitable intraday trading strategies are:
Pull Back trading
Moving Average Crossover
Relative Strength Index (RSI) trading
What is the Best Strategy for Intraday Trading?
Again, there is no single best strategy for intraday trading. One may work for one trader, but it would not work for another. The effectiveness of an intraday trading strategy will highly depend on your trading style and also on the market conditions. A characteristic that every trader should have is to be adaptable to any changes. Certain strategies might not work for one market condition and the trader should know how to exploit it through another strategy.
How can I Successfully Intraday Trade?
In intraday trading, you might earn good profit today, but you might lose it the next day. Being a fast-paced trading style, a trader should be prepared. The first thing that an intraday trader should do is to create a solid plan with a well-thought-out strategy and good risk management system. You should also have a clear goal so that you know your limits.
Discipline is a critical factor in becoming a successful intraday trader. Even if you incur losses or make a profit, you have to stick to your trading plan. The important thing to do is to learn from experience. There is no guaranteed success overnight and it will take some time and lots of practice to become successful.
ENTRY AND EXIT STRATEGIES FOR DAY TRADING
What is an Entry and Exit in Trading?
An entry in trading refers to the price of a security which a trader buys or sells. On the other hand, an exit refers to the price of the security at which the trader closes his position. A trader can sell at the exit point as they are buying assets for the long term or buy at an exit point if the trader is short.
How Do You Successfully Enter and Exit a Trade?
Knowing when to enter and exit a trade is an important aspect of your trading strategy. Some traders feel pressured before entering a trade and this could get in the way of having a profitable trade. The entry point removes the emotions out of the trading decisions because from there on, you are going to rely on your strategy.
Using indicators such as support and resistance levels can help you better understand the market movements. Usually, the best time to enter a trade is when the price of an asset hits a strong support demand zone or when taking a short position once the price hits a strong resistance zone. Trends are also good tools in analyzing the market. It can help identify any trend shifts and determine the best time for entering a new trade.
An exit strategy is generally more important and harder to execute because this is the part where you find out if you are able to make money. This strategy should already be laid out even before you enter the market. You should have calculated risk and reward levels beforehand and set a profit target to exit the position whether you incur loss or gain profit.
Stop-losses are also important because they would minimize losses. A stop-loss order executes a trade once the price of the security reaches a certain price or also known as stop price. It is used as a tool to prevent losses in case the price suddenly drops. One way of incorporating stop-losses in an exit strategy is to place them a point past support level where other traders are also most likely to exit.
LIST OF TRADING STRATEGIES
Momentum trading strategy
Breakout trading strategy
Price action trading strategy
Reversal trading strategy
RSI and Stochastic Oscillator trading strategy
Pivot point trading strategy