The terminology, day trading, is essentially a reference to the practice of selling off and buying certain security within one whole day of trading. Although it can happen in any kind of trading marketplace, you can expect it to be largely prevalent in forex markets and every stock market.
Generally, those who engage in day trading are knowledgeable people and have deep pockets as well. These individuals use clever strategies of trading (for the short term) to squeeze full advantage of minor fluctuations in price values that take place in various currencies (which are quite liquid in nature).
These are the two ideal tips for novice day traders who are eager to dip their toe in the pool where day traders work.
Steer clear from every penny stock
When you day trade, you will be most likely seeking minimal price values and lucrative deals. However, it is prudent to steer clear from every penny stock. Such stocks are usually not liquid, and the likelihood of making a big win is usually slim.
What most of the stocks have in common is that these stocks trade less than 5 dollars per share. They become unlisted from key stock exchanges, and you can only trade them OTC (over the counter). You may want to stay away from these unless you have done your thorough research, and you identify a golden opportunity.
Set adequate funds aside
On every trade, evaluate just how much money you are fine with risking. Most thriving day traders do not risk more than roughly 12 percent of their individual accounts for each trade. Suppose you own trading valued at 20000 dollars and have no problem risking 0.5 percent of your total cash in every individual trade. In that case, your loss corresponding to every individual trade (maximum) is just a mere 100 dollars.
One of the wise practices that you can adopt if you want to become a day trader is to put an extra volume of cash aside, which you can easily use for day trading and have no problems losing.
Chief day trading plus point
Day trading implies using various strategies and technical tools to take advantage of the price change within one given asset.
Probably the biggest plus point for all those who partake in the art of day trading is the freedom to speculate on several markets, including forex, stocks, futures, etc. Shares are especially volatile since the closing positions at every trading day’s end eliminate the overnight risk of financial markets gapping during the course of the night.
- Day trading employs a wide variety of techniques and strategies to capitalize on perceived market inefficiencies.
- Day trading is often characterized by technical analysis and requires a high degree of self-discipline and objectivity.
