Quite a few people call themselves day traders and claim to make money everyday. However, statistics (estimated) show that only 10% of day traders are successful. That begs the obvious question – How do I become one of the 10%?
Here are a few tips to keep in mind and then you will be well on your way.
1. Get the right equipment. A high speed internet connection is required as trades happen very fast. Online brokers will provide platforms and interfaces that are your link to the market.
2. Do sufficient research and market analysis. A certain amount of knowledge of market fundamentals and familiarity is needed, but it is not enough to succeed. You’ll need quite a bit of technical analysis to sift through all the charts, patterns, movements and the like. Most online brokers will provide you with the tools to do exactly that. It may sound like quite a bit, but once you get to know the various market indicators you will develop your own trading style. That brings me to the next point.
3. Strategize. Price movement is the thing that will make you money. Entry and exit points (when to buy and when to sell) will have to be determined. A number of people trade only 2-3 stocks a day while others trade a whole bunch. The number of stocks traded depends on your own style. Work out a ratio. Only trade a stock if the investment to risk ratio is 2.5 or more.
4. Be diligent. Yes, time (and quite a lot of it) is needed. You have to watch the movements, graphs and trends. It doesn’t help to shoot in the dark and hope you hit something. That approach will quickly lead to bankruptcy.
5. Start slowly. The more you trade, the more there is to keep track of. As a beginner it is wise to choose one or two trades. As you become more comfortable with these trades you can pick up the pace and move to a larger number of trades per day.
6. Decide how much you can afford to lose. Even the best traders lose money at times. Cut your losses before you run into further losses. Don’t make any emotional decisions. When you lose on a trade don’t think that you’ll have to do a certain number of trades to make up those losses.
Day trading is not for everyone. There is risk involved. However, if you keep these tips in mind you will be well on your way to making a success of it.