Are you looking to take advantage of market positions held for a short time? This means opening and closing a position(s) on the same day. Don’t make the mistake of jumping into online trading platforms without having proper knowledge of tested stock trading strategies.
Use these eight tips of day trading to build wealth from the comfort of your home or even while you’re at work.
- Trade Using Money You Can Bear to Lose
Wise traders know how to split their money across various investment channels. There are the portions you can’t afford to lose—for instance, your retirement income and funds for your long-term goals. These are funds you invest carefully so as to avoid potential risks. If you are going to make a risky short-term investment using these funds, you must first make sure the odds are in your favour.
Therefore, if you are going to day trade, use your risk capital—that is, money you can afford to lose—so that even if the trading goes awry, you would have your other investments to fall back on.
- There Is More to Day Trade Than Stocks
Other day trading choices you have include, forex, futures and options. Like stocks, they display liquidity and volatility. If you are attentive to the trends of the financial market, these options can present great opportunities for multiplying your wealth, even when the stock market is showing no promises.
- Don’t Be Afraid to Order
Some traders, especially the newbies, tend to forget themselves repeatedly when analysing the market and thus, lose great opportunities because they didn’t act quickly enough. Depending on how disciplined and organised you are, you may find that automating your ‘orders’ and ‘stops’ can be a great way to snatch appealing opportunities and also relinquish assets without major damages to your investments. Don’t be too scared to press order.
- Don’t Risk All Your Capital on a Single Trade
The thing about day trading is that, while you are trading on an asset, opportunities might sprout elsewhere. And you want to make sure that you have extra funds on standby so that you can leverage the opportunities. Therefore, always place a percentage of your total day trading budget on standby, say, between 2% and 20%. That way, when an opportunity sprouts, you would have the funds to snatch it.
- Learn to Discipline Yourself
In order to be successful in trading, you need to set and maintain a trading plan. Being impulsive can be your worst nightmare. Control is the key. Learn to manage your impulses. Find a balance between greed and fear. For instance, while greed can leave you pulling out too late, fear can make you pull out too soon.
- Learn from Trading Experiences
Don’t let your bad trading experiences pull you down. Instead, learn from them. Traders encounter losses on a daily basis. As a trader, your trade wouldn’t always go as expected. Instead of beating yourself up, check whether you were the sole cause of your loss. What did you do wrong? Perhaps you failed to get in early. Or maybe you pulled out at the wrong time. Learn and move on.
- Learn to Be Patient
It’s rare to get rich on a single day’s trade. Therefore, don’t expect that. You must learn to be patient when looking for entry points. You must learn to only trade when those opportunities are aligned with your standards, instead of impatiently diving in to trade against your better judgement.
- Never Jump in Without Setting Price Targets
As you decide how much you want to invest and how much profit you expect, also decide on how much loss you are willing to risk. Once, you have decided, maintain that stance. This will help you to minimise potential loss in the event that the market turns against you. It will also help you to curtail your greed when prices spike.
You may also want to monitor supply and demand closely and use imbalances between them as entry points. Successful traders always keep an eye on the changing market trends. You should too, if you intend to be successful in day trading.