Are you happy to make risky investments if the potential gains are large?
Do you have at least $500 capital you can afford to lose?
Are you happy to spend three months learning the ropes before you start?
If you can answer ‘Yes’ to all three questions, then you could make it as a day trader.
Learn the Ropes
Do you know how to read a stock price moving average chart? Do resistance levels mean anything to you? What about candlestick charts?
Every area of specialty knowledge has its own language. How do you educate yourself in stock market jargon?
You read, or you watch videos if that’s how your mind works.
Even before you start a virtual investment, you need to know enough to make good decisions on which virtual stocks to buy.
Timing is everything on the stock market, so you need to know what stocks to buy now. Yes, Sunday newspapers have stock picks, and yes, start with those, but you will need to move on from free investment tips. Good data takes research and research is expensive, so the best tips are going to come from paid share dealing advice services.
Find a Virtual Investment Platform
If you want to get started today, then be prepared to watch your investment value dwindle daily. Everyone loses money when they start, so it’s much better if your investments are virtual ones rather than real-life ones.
Buy the Hardware
You will need at the very least, a second computer screen. Plugging a second screen into most PCs and laptops is a simple plug-and-play option.
A powerful computer, a large, uncluttered desk, and a fast broadband connection are crucial to success as a day trader. If your broadband is slow, forget the idea of day trading where even a few seconds can make the difference between selling at a profit and making a loss.
Develop a Strategy
Day trading is a high-risk strategy. You must minimize your risks, or sooner or later you will lose everything.
How will you minimize your risk?
Diversify – Ideally, you should never put more than 1% of your capital into one stock. 1% is easy to do if you have $100,000, but impossible if you only have $200 total to invest. However, you should still spread your risk as far as you can. Five $100 stock buys are safer than one $500 buy.
Plan Your Trades – Never buy a stock on impulse. Always have an exit strategy mapped out before you buy. Know the price you will sell at ifthe price goes up – Taking your profit.
More importantly: Know the price you will sell at if the price goes down – Stopping your loss.
Never Hold Overnight – Always sell every stock you are holding before the market closes. This prevents you from losing money if bad news comes in between the market closing and opening the next day.
Treat Day Trading as a Job – If you hold shares and are not at a computer to sell them if the price falls, you WILL lose money. Yes, you can set stop-loss sell automatic sell and profit-taking positions, but you will miss opportunities that arise during the trading day.
Find a Broker
Stockbrokers make their money by charging you every time you buy or sell stock. Some will charge a flat fee, others will make their money from a larger spread fee. Spread is the difference between buying and selling prices. When you buy foreign currency from a bank, the bank makes money because they buy the currency at one rate and sell it to you at a worse rate.
Your stock deals will be small, so flat fees will quickly eat up your capital. Flat fees work out cheaper for large purchases. Wider spreads work out better for small investors. Look for an online stock broker that makes its money from spread fees.
Your broker must also be geared up for day traders, offering the essential analytical tools to trade profitably.
Work out the fees you are going to have to pay, because they can mount up quickly.
Could YOU Make it as a Day Trader?
Anyone can trade stocks over the phone or online just by setting up an account with an online broker. It really is a great way to lose a lot of money very quickly.
If you started today, you would fail. However, if you are ready to follow the advice here, there is every reason to think you could succeed.
- Are you prepared to learn before you invest?
- Do you have at least $500 you can afford to lose?
- Are you ready to invest in a paid investment tips service?
- Do you know how to decide your profit-taking and stop-loss selling positions?
- Will you be strict with yourself over setting profit-taking and stop-loss selling positions before every purchase?
- Do you have enough self-discipline to follow your planned trades, even if it means selling at a loss?