The concept of day trading is quite simple. You buy a stock at a low price with the intention of selling it for a profit before the end of the day. And while that sounds easy enough, it can be very difficult for the untrained trader. In fact, less than 10% of those who practice day trading are actually profitable. Here are some things you can do to become a successful day trader.
Tip #4: Have Balance
If you want to be a profitable day trader, you need to have a good balance between risk and reward. The more you risk, the more you can win and the more you can lose. So it’s a double-edged sword. That is why having balance is so critical. Use a trading strategy that has small stop losses and large profit targets.
Tip #3: Start Small
Don’t try to do too much too soon. Start small and grow bigger. This of course goes against most trading systems which will tell you to increase your position size when there is a losing streak. When it comes down to it, it’s all about having a solid and disciplined strategy to follow. This way, if you experience losses, which by the way, you can recover immediately.
Tip #2: Trade only on electronic markets
Electronic markets have much lower commissions than other markets. It also has instant fillers, which is very important to its success. In the day trading business, the sooner you know your order has been completed, the better. You can then take that information and plan your outing accordingly. Never place an exit order until you know your entry order has been completed.
Tip #1: Use automation for exits
Human emotion is the main cause of errors and mistakes in daily trading. No matter which way the market starts to move, you need to control your emotions to avoid unnecessary mistakes. The best way to avoid a moment of panic and poor decision making is to put your trades on autopilot with bracketed orders. This way, when certain things happen in the market, your positions will be closed automatically and at specified levels.
These are 4 simple tips that you can use to become a profitable day trader. Do your homework so you can stay ahead of the game and you will be able to succeed.