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The Basics of Day Trading

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It was not too long ago that lot of people didn’t have access to trade in the futures and stock market. They would have to meet up with brokers who can do the trading and other legwork for them. While it can be a convenient idea, you would have to eventually pay them for their services, and your opinions and mindsets might clash with each other.

Nowadays, everyone can trade on their own without having to depend on professional trade brokers. Thanks to the Internet offering online trading options, from the stock exchange to cryptocurrency, everyone can throw their hats in the ring and join the game.

As well if you think you are ready to try out futures trading, be sure to read my Reviews of Funded Futures Trading Evaluations.

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This is what we call “day trading”. You can hit the jackpot and be a day trader with the most lucrative job description if you play the game right. However, it is not always a bed of roses, as even the most seasoned and experienced day brokers can hit a slump, lose thousands, and fall from grace. If you are not mentally prepared, you can find this complex as a newbie in the game.

This article tells you everything you must know about day trading so that you can be prepared to take on this journey.

Day Trading for Dummies

Day trading means buying and selling securities during a single trading day. It is most commonly practised in markets such as stock markets and foreign exchange. Nowadays, cryptocurrency has also entered the game, so there are many options for newbies to start in day trading.

Usually, day traders are often loaded with knowledge and funding. They do not go to war without any weapons — learning about the current financial and trading trends and the money to buy and sell stocks during the day. They are known to exercise everything under their belt to bank on small price movements that usually happen in stocks and currencies that are highly liquid.

One thing they are accustomed to doing is being attuned to the current trends in business and finance. One popular technique among day traders is to check the news for updates and buy or sell stocks according to the news.

Some of them watch how companies move by official announcements, news reports, and other sources of reliable information. For example, suppose a significant entertainment agency has acquired a top-billed celebrity under their wing. In that case, the stocks will rise up because of the star. The day traders use that information to buy and sell stocks from that agency because they can benefit from it.

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Day Trading Strategies: Revisited

As mentioned earlier, day traders use a lot of strategies to buy and sell stocks effectively and efficiently without hurting them in the process.

Some of the most common and popular day trading strategies that many day traders swear by include:

  • News-based trading: as mentioned earlier, most day traders watch out for the news to determine which stocks will move and drop according to the public’s reception towards the report.
  • Scalping refers to a strategy that calls to make several small profits based on the minimal price changes throughout the trading day.
  • High-frequency trading or HFT: this strategy is more commonly used by the most experienced ones. This refers to using a system of sophisticated algorithms to exploit inefficiencies that happen in smaller markets.
  • Range trading: this strategy focuses on resistance levels and the support to buy or sell stocks throughout the day.

There are other strategies used by day traders, both well-known and obscure, but these are the most popular ones. Every trader must have used one of these in their whole day trading career.

Qualities a Good Day Trader Should Have

There are many certain qualities an excellent day trader should have to achieve success and relevance in the day trading game. It can be hard to have all of them simultaneously, but let your experience be the teacher.

Enough Capital and Funding

As mentioned earlier, a good day trader is well-versed in the trade and sufficiently funded. A good day trader knows how to use his funds well by only using the risk capital they can live without, in case they lose it.

Trading in this manner helps them separate trading from their emotions. It also helps them avoid getting bankrupt when several deals go awry unexpectedly. Remember, stocks are very volatile — one day, they’re on the top of the world, and the next day, you’re crashing downwards with them.

You must have more than enough capital to be able to trade and capitalize on intraday price movements that happen within the trading day. You should also consider having a margin account so that you can benefit from it on short notice.

Knowledge About The Trade

Before becoming a novice day trader, you should equip yourself with a basic understanding of how stocks and exchanges work. Whether it is a cryptocurrency, foreign exchange, or supplies, you must understand how the entire game works because this is not just a simple pastime.

Thus, you should be skilled in reading charts and doing technical analysis whenever necessary. One common mistake that novices usually commit is that they think what they know about the trade can sustain them throughout their journey. However, a good day trader should always treat each day as a learning experience. A good day trader never stops learning. As mentioned earlier, the markets are always volatile, so you should always be prepared for whatever happens, for better or for worse.

Cryptocurrency is one of the most popular markets these days. There is a lot of available information to gobble on to prepare you in day trading for cryptocurrency. Similarly, foreign exchanges and stocks also offer many kinds of resources to find information on how to buy and sell stocks effectively and use the volatile trends to your advantage.

A good day trader should always have an insatiable thirst for knowledge and learning day by day.

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Set of Effective Strategies

A good day trader knows how to stand out from the crowd, their own signature way. They should have several strategies that are proven to be working and effective under their sleeves to set themselves to succeed from the get-go.

There are a lot of practical strategies that day traders use. These include trading news, swing trading, and arbitrage. As good day traders, they should be able to refine and finetune their strategies into something that will work in their favour. These are already effective strategies, but you must finetune, tweak something, and refine everything so that you can get secure and safe trades every single day.

Lots of Discipline from Within

However, no matter how intelligent you are in the trade, how full your pockets are, and how effective your trading strategies are, everything will crash down the drain if you are not disciplined enough. That will be the end of you as a day trader.

Success would never be possible if you were not disciplined enough. Discipline will take you a long way if you can use it effectively in your typical day trading tactics. Always make trades that will fit your own criteria. Never settle for something lesser than that to earn quick bucks. As they say in the business, always plan your trade and trade your plan.

Day traders, in general, like volatile stocks because, with every move, there can be any significant gains or losses, depending on the stocks that day. A good day trader knows when to exert discipline the most to ensure success.

Confidence

Lastly, a good day trader must have self-confidence that will allow them to charge head-on to the market whenever possible. You cannot be a day trader if you are weakhearted. Remember that this is a gamble. You should be brave and confident enough to risk your funds whenever reasonable for you to gain massive gains.

A good day trader should also have a strong heart whenever they lose stocks or suffer from losses due to the high volatility of their supplies. They should be able to separate their emotions from trading because it can be heartbreaking to see your stocks crash down one day from staying on top for months.

Remember, stocks are volatile, and your mind, soul, and heart should be prepared for everything before you go into battle. No one goes to action with a weak heart, so always have a strong core and conviction for your goals and aspirations in life.

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Conclusion

Day trading is one exciting profession to take on, with a considerable potential to become a lucrative business that will bring you prosperity and success for a long time, only if you play the cards right. However, you should possess all the qualities of a good day trader to be able to conquer the trading game, one transaction at a time. Have a strong heart and a prepared mind to celebrate the little successes and significant losses — stocks are volatile, and nothing is inevitable in the trade. Lastly, be disciplined and confident every day. With all these things, you can be a successful day trader who learns from experience.

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Risk Disclosure:

Futures and forex trading contains substantial risk and is not for every investor. An investor could potentially lose all or more than the initial investment. Risk capital is money that can be lost without jeopardizing ones’ financial security or life style. Only risk capital should be used for trading and only those with sufficient risk capital should consider trading. Past performance is not necessarily indicative of future results.

Hypothetical Performance Disclosure: 

Hypothetical performance results have many inherent limitations, some of which are described below. No representation is being made that any account will or is likely to achieve profits or losses similar to those shown; in fact, there are frequently sharp differences between hypothetical performance results and the actual results subsequently achieved by any particular trading program. One of the limitations of hypothetical performance results is that they are generally prepared with the benefit of hindsight.

In addition, hypothetical trading does not involve financial risk, and no hypothetical trading record can completely account for the impact of financial risk of actual trading. for example, the ability to withstand losses or to adhere to a particular trading program in spite of trading losses are material points which can also adversely affect actual trading results. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results and all which can adversely affect trading results.

You can read more here: Risk Disclosure

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