Having the right strategies when it comes to day trading can help you make a significant profit. Read on for 5 day trading strategies you need to be using.
Just six percent of people who give professional trading a try will make it. Can you beat the odds and find success in day trading?
While it might sound like the cards are stacked against you, many people fail as day traders because of easily avoidable mistakes. With the right day trading strategies, you can avoid these pitfalls and start making money in this lucrative, flexible field.
Which day trading rules should you follow for success? In this guide, we’ve put together some of our favorites. Read on to learn how to make day trading stocks work for you!
What is Day Trading?
In day trading, you both buy and sell stocks within the same day to make a profit. While you can technically day trade in any market, most people do it in the stock market, while some also day trade in the forex market.
The right trading strategies will help you make the most out of the small price changes that can happen in a single day. However, there are also a number of day trading misconceptions. It’s not a get-rich-quick scheme, and it actually takes a lot of knowledge for anyone to succeed as a day trader.
It comes with risks, and you need enough financial stability to take those risks. Day trading doesn’t mean putting everything on the line. Instead, it’s about strategically working with money that you can afford to lose, using the strategies that are most likely to make a profit.
The Day Trading Strategies You Need to Succeed
Which strategies will help protect and grow your investments? Let’s take a look at some of the top ways to succeed as a day trader.
1. Avoid Market Orders
For day traders, limit orders are more useful than market orders.
With a market order, your broker gets instructed to sell or buy at the best possible price. However, this leaves a lot of room for interpretation. The best price might not be one that you make money on.
With a market order, the price might fall farther than you wanted to before the sale gets made (or rise more before stocks get purchased). Limit orders prevent this by setting maximum and minimum prices.
With these parameters in place, you’re much less likely to end up with buy and sell choices that you’ll lose money on. This protects you in case of a large, unexpected price change.
2. Invest Your Time
Day trading doesn’t mean you won’t have to put in a full day’s work. If you want to become a successful day trader, you’ll need to invest lots of time to make profits.
This is especially true when you get started because there’s a lot to learn. Devote yourself to learning day trading terms and setups that will help you succeed. Learn how to read the markets wisely.
In an average day as a day trader, you’ll be spending hours watching the markets and finding the right opportunities to trade. While your hours might be more flexible than at some jobs, you’ll still need to put in the time and effort to succeed.
3. Handle Losses Well
When you’re winning in the markets, it’s easy to stay clear-headed and make good decisions. But for many traders, a loss can create a sense of panic that’s hard to recover from.
It’s important not to freak out when you have a few losses. Otherwise, you might find yourself suddenly making trades without thinking them through, which is a surefire way to lose money.
Losses are a part of day trading. There’s no way to avoid the occasional loss. It’s all about knowing how to handle them when they happen.
It’s best to come up with a strategy for losses before they occur. You can figure out your game plan while you’re calm and clear-headed. Then, if it happens, you won’t make bad decisions in the heat of the moment.
4. Educate Yourself
Learning how to day trade isn’t a one-step process. While you’ll need to start by learning the ropes, you’ll also need to develop a learning habit that lasts for life (or at least as long as you keep day trading).
Successful day traders stay on top of the latest market news, and any events that can impact your decisions. For example, if you trade in the forex markets, you’ll need to keep up with the news that can impact the currencies you trade in. If a country updates its economic policy, this can affect your assets.
Luckily, it’s easier than ever before to stay educated. Almost every resource you could use is online. You’ll just need to find those resources and learn how to separate the good online information from the bad.
5. Keep a Journal
Some of the world’s most successful traders still use a journal to track their trades.
This strategy might sound old-fashioned, but it works for countless people. In your journal, record all your trades: both wins and losses.
Each time you record a trade, note the things you did right, and the things you could improve on. This will help you learn from your experience. It’s also a great way to turn losses into positives since you’ll be able to see where you went wrong and what you can learn from it.
Ready to Start Day Trading?
If you use these simple day trading strategies, you’ll be able to start making profits faster and more consistently. This will let you become a member of the small club of successful day traders.
While many resources warn people away from day trading, you can become successful as long as you have the right approach. And being a successful day trader is a lucrative, exciting, and fun career.
Of course, there are also many other ways to make money in the markets. If you’re just getting started with investing, don’t miss our beginner’s guide to the stock market!