April 15, 2018, 10:38 am

Day trading for beginners – What you should know

by: The Financial Blogger    Category: Investment, Market and Risk
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“Being a rookie trader, it’s easy to forget the basic set of rules when it comes to day trading.” Tom Soyer, a senior financial analyst at Olsson Capital said in a conference held recently.

According to Soyer, a high percentage of day traders give up when they lose out on a trade. The main reason for this, however, is that these new traders have not taken the basic trading rules to heart. To make it easier for rookie day traders to begin a trading career, Soyer composed a list of basic rules to take into account when trading for the first time.

You are never too old to learn something new

It does not matter how long you have been dabbling in day trading, you always need to keep a close eye on trading publications. These can include chart, reports and financial records of the type of trading you are doing.

Don’t expect to become rich overnight

Day trading, although done in short timespans, should not make you think that you’d become rich overnight. As a new trader, you should be prepared to lose out on a few trades. Should you complete your day of trading and be able to cash out a substantial amount of money, do not expect that every day will go like that.

When it comes to margin trading

If you choose to borrow money from your broker to give your trade a bigger boost, you need to take into consideration that this type of margin trading holds its own risk. Should your trade be successful, you walk out with better results as a result of the money you borrowed. But if the trade goes south, your loss will be even bigger than when trading without borrowing.

Don’t trade according to what you hear

The media is full of opinions and speculation. Don’t fall victim to its claws. Yes, that’s easier said than done as we as human beings tend to get emotional about these type of things. Before you make a trade, know what you want from the trade and have a pre-set plan for how you want the trade to go. If you hear that the market is about to fall, make sure of the fact, read your charts and should it be true, exit the trade to minimize losses.

Keep your number of stocks low

If you’re a day trader that is just beginning out, it is better to keep the number of stocks you trade to a maximum of two per day. This gives you the ability to spot new opportunities much easier and keep your wits about you when keeping an eye on the markets you trade on during the day. As you gain more experience, you can increase your trades per day accordingly.

Don’t rush your trades

When the market opens in the hours of the morning, prices tend to be volatile as many traders are ready to execute their trades right away. As a beginner trader, it is better to wait for at least 20 minutes before making a trade as, by this time, the market should begin to settle again. Towards the end of the day, trade price volatility will be higher again as ,by this time, traders want to close their trades for the day. That being said, the best time for a rookie trader to execute trades would be at midday.

Keep your trading money aside

It is a good idea to keep the money you intend to trade with aside. That way, you won’t trade with the money that is intended for other expenses. As a new trader, you will have to be prepared to cut your losses with some of the money you have set aside as not every trade will fall in your favour.

If you follow the above-mentioned set of rules while developing a trading strategy, it is Soyer’s opinion that day trading will be much easier for rookies. Since new traders are still learning the tricks of the trade, it is better to play it safe before jumping into the deep and possibly drowning in trades you make without truly understanding what you are doing.

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