Jumping into the lucrative industry of day trading is exciting and in some cases highly profitable. It’s exactly what attracts thousands of people to it every year.
The only issue is a lot of the time, newbie day traders burn out their funds too quickly and end up bankrupt. The idea of becoming addicted to day trading and losing all your money scares away most people.
However, things don’t have to be this way.
With a proper day trading guide, you can establish a routine and plan that ensures you stay on the positive end of the spectrum.
Of course, there’s no guarantee you’ll always win, but a strategy will help you stay in the game for many years.
Now, let’s review how you can break into the day trading industry without going broke.
Invest in Yourself First
The very first thing you should do before opening up a single day trading account is to invest in yourself.
Get courses, books, and a day trading guide to help you understand the industry. It seems simple enough – you buy and sell stocks once or multiple times daily, and earn or lose money. In a sense, it’s like placing bets.
However, there’s a lot more to it than that. You have to understand how to read charts, identify trends and, most importantly, when to buy and sell. Do your homework in advance, so you don’t end up down and out before you even get started.
Then once you get a little education, it’s time to practice what you’ve learned.
The best way to do this is to get a demo account and begin trading in the real markets with fake money. This will help to prepare you psychologically for the ups and downs of the marketplace.
Also, you’ll see how much discipline, patience and focus is required. Without these traits, you run the risk of breaking from your strategy and making trades based on emotions rather than logic.
Establish Your Budget
The next step in this day trading guide is to set aside capital for your investments.
Go over your budget to see how much you can comfortably invest in your day trading venture.
Are you planning to do this full-time or part-time? Either way, you want to set a certain amount aside.
As a rule of thumb, you should aim to use only 1% to 2% of your account per trade. If you have $10,000 in your account, you want to make trades at $100 to $200 or less.
Then as you continue, your trades are less and less as your account depletes. But this isn’t written in stone – you can choose to risk a little more as you grow in confidence.
Some trades may yield greater results, so it’s tempting to risk more sometimes. Just make sure to avoid having all of your money in the market at once.
Schedule Your Day Trading Hours
Let’s face it, day trading can easily take up a majority of your day. You’ll have to set aside time to focus on the markets, so you don’t miss out on important opportunities to buy and sell.
While some folks day trade part-time, it’s not really cut out for folks with very few hours per day to trade.
However, you can have set days each week when you really hone in. For instance, you can put in 8 hours daily three days per week, if you don’t want to work 40+ hours weekly day trading.
If there’s one thing you’ll learn about day trading is that there are no set hours for opportunities to present themselves.
Choosing days to watch the market is key. It’s a fast-paced industry, so stay on your toes.
Begin with Smaller Trades
After watching countless hours of YouTube videos of day traders making loads of money, it’ll motivate you to get to where they are and quickly.
However, this isn’t a good idea.
Investing large amounts at the start of your day trading career is a big mistake too many newbies make. Start off small with your first investments. Focus on trading only one or two stocks daily.
This will also make finding and tracking stocks much easier.
Remember, day trading is very nerve-racking, especially when you’re first starting out. By taking things slow, you can help minimize the stress and potential of costly mistakes.
Stay Away from Penny Stocks
Likely, you’ve heard different stories about penny stocks – some good and some horrible.
While you’re looking for stocks with low prices, you don’t want to stoop as low to trade penny stocks. They’re considered highly illiquid, which makes it a lot harder to hit the jackpot with them. In other words, they’re often a complete waste of time.
Time Your Trades
At the start of the trading day, orders are placed by traders and investors right away, so there’s a lot of volatility at this time. A seasoned professional can see profitable patterns quickly in times of volatility.
However, as a new day trader, you’ll need to spend the first 15-20 minutes watching.
During the middle of the day, the volatility dies down, then picks back up near the closing bell. Rush hours are lucrative, but for beginners, it’s best to avoid them altogether. At least for now.
Use Limit Orders
There are two types of orders you can use to exit and enter trades – market orders and limit orders.
Market orders execute as soon as the best price at the time is seen. This means there’s no price guarantee.
While a limit order guarantees the price, it doesn’t automatically execute.
By using limit orders, you can get trades that are more precise with the price range you set for buying and selling, which gives you more control.
Keep Your Goals Realistic
Sure, you can potentially earn a heck of a lot of money day trading.
However, you want to enter into this field with a realistic mindset. Most trades only win 50 to 60% of the time, so the key is to try and win more than you lose.
Keep your risk low and ensure your entry and exit methods are clearly defined. Stick to your strategies and you’ll have a higher chance of staying in the profitable end of the spectrum.
Take This Day Trading Guide to the Next Level
A day trading guide is just that – a tool to help steer you down your new path.
While these tips are valuable for starting off, you shouldn’t stop here.
This is just the beginning of your journey. Continue educating yourself with various courses, books, videos and finance tools and of course, check out the comprehensive reviews of robo-advisors and online brokers.