The act of buying and selling financial instruments once or multiple times within the same day is called day trading. Here are five day trading strategies that every beginner trader must follow.
Knowledge is the power
The basic trading procedures include knowledge. Having knowledge about trading is the only power a beginner needs to carry out successful trades. Day traders need to keep on the latest news on the stock market and events that might affect stocks. These events and news are accessible to anyone using the internet. Consider this as your homework and make sure you do it with utmost sincerity. Make a list of stocks that you would want to trade and keep yourself informed about these companies and markets. Scan business news every day and visit the most reliable financial websites to stay updated.
Set funds aside
Do not use all of your funds in trading. This is one of the biggest mistakes that beginners make while trading. Assess the amount that you are willing to risk on each trade. Many successful day traders prefer risking less than 1% or 2% of their accounts per trade. For example you have a trading account with $50,000 and you are okay with risking 1% of it on each trade, your maximum loss per trade would be 1% x $50,000.
With minimum loss you will be able to plan better trades ahead. Remember, you can go lucky every day in the world of trading so set aside the amount that you are prepared to lose.
As a beginner, always learn to take baby steps. Focus on not more than two stocks at a time during a day trading session. It is easier to track and find opportunities with just a few stocks but trading is difficult too. With a small amount invested you have a smaller loss and a long way to go.
Time your trades
Many times orders placed by investors and traders start getting executed as soon as the markets open early in the morning. This contributes to price volatility. If you are a seasoned player you must be able to recognize the patterns and can easily make profits. But for beginners, it is better to just read the market without making any move within the first 20 minutes. Middle hours are least volatile hence you can prefer trading during this time. Again, avoid getting your hands in the market during the closing bell because that is again the time when movements are at peak. Though the rush offers great opportunities, it’s better to avoid them initially.
Be realistic about profits
Day trading strategies are not about winning all the time to be profitable. Many traders win only 50% of their trades, that doesn’t make them a loser. And that’s because they make more with their winners than they lose on their losing trades. Make sure your risk on every trade is limited to a specific percentage of the account.
Apart from following all the above day trading strategies, always stick to your plan. Discipline to stick to the planned strategy can make you win many trades.