A Beginner’s Guide to Day Trading

A trader is defined as an individual or entity that buys and sells financial instruments such as bonds, stocks, derivatives, commodities and mutual funds. Under that umbrella you’ll find that there are many different types and how they interact with the market varies on many levels. One method that has become quite popular all over the world is day trading. Where long-term can see gradual increases in capital, day trading has the advantage that profits can be made fairly quickly. It is very much-concentrated on short-term transactions, with stocks being bought and sold within the same day. Let’s explore day trading and delve into risk levels, expectations and the importance of research and having a solid strategy.

Research Is Key to Success

If you want to know how to make a living day trading, proper research is essential. Read financial blogs and eBooks, listen to podcasts, watch videos and learn from other people’s experiences. Discover all there is to know about the main terminology that’s needed to successfully understand the market. Know how to identify whether a market is bearish or bullish. Find out what an IPO is and where the capital that’s raised goes. Educate yourself on other important variables such as ‘float’, ‘stock splits’, ‘secondary offering’ and ‘lagging indicators.

Set Expectations

As with any new investment venture, it is smart to start out slow and small. Unlike other kinds of trading, you will need to be persistent, decisive, quick-thinking, independent and disciplined to be successful. Knowing that you need to demonstrate these characteristics every time you sit down at your computer will set your expectations straight. Don’t think life will be as simple as sitting at home sipping on coffee whilst you make fast cash! You also need to know that this is not a get rich quick scheme. Know your budget and set your earning expectations around that figure without forgetting to take all variables into account.

Do A Risk Assessment

Part of your preparation for entering the market should be a self-audit of how much risk you are prepared to take. This should be done before you even open an account with a platform. Knowing how much capital you have to invest, planning your trades well, setting stops and losses to limit risk, calculating the expected return and knowing about diversification and hedging will all help you on your way to making smarter moves.

Come Up with A Strategy

In terms of markets, it’s a good idea to find one that crosses over into your education, knowledge, work life and/or interests. If, for instance, you have worked in the tech industry, cryptocurrency might be a good market to get involved in. Or, if you have an interest in world economics, you may want to look at Forex and the opportunities that you can explore in that world. Have you thought about what price target strategy you’re going to use? From scalping and fading to pivot and momentum trades, you need to know the differences between each strategy and choose the one that resonates most with you. Over time, you can add another one or two of these strategies to your trading tool belt.

Carolyn Coley is a blockchain reporter. She joined Smartereum after graduating from UC Berkeley in 2018.

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