A day trader buys and sells securities, stocks, and other financial instruments within the same trading day. You might have heard about them on the television or in movies, and people think that day traders become rich in a single day.
Even though they are “day” traders, the risk is also higher. So, if you want to become one, you need to learn about the basics. That includes the techniques and latest trends regarding the stock market.
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Here Is The Ultimate Guide To Becoming A Day Trader:
Have the Right Mindset
The truth is, being a day trader is not for everyone. There could be higher or every day returns, but the risk is greater. It would be best if you also considered a few things:
- Your ability to self-learn
- The fluctuation in the stock market and your ability to take risks.
- Long working hours
- Commitment to trading
Contrary to the belief of many people, trading takes a lot of work. You need to have never-ending learning to keep pace with the latest trends in the market.
Read more books, and study to practice the right strategies to earn more profit and minimize the risk.
Have a Sufficient Cushion of Capital
When you plan to enter day trading, you need to prepare for the losses. In some instances, you can only recover from these losses after the eighth or ninth trade. That is why a sufficient cushion of capital is crucial. According to expert traders, like Van K. Tharp, you need at least a minimum of $100,000 for trading.
That’s why you need to study and save more before you quit your job. Day trading is not similar to a lottery. You need the right skills to become successful in this field.
Know How the Markets Function
You need to study the basic and complex knowledge regarding the stock markets. Some of the things you need to learn are the exchange trading hours and holidays, news event impacts, margin requirements, and the allowed tradable instruments.
Select Two Established Trade Strategies
Each trader has a unique technique or strategy they use to perform day trading. Having two approaches will help you have a backup once the other doesn’t work. When you build more experience, you have more than two methods with more complexities to perform day trading.
Consider Your Trading Plan
You have lots of things to consider to integrate your strategies and plans. Ask yourself, “How frequently do I need to place trades?” “Which of my assets should I trade?”, “How much money per trade should I spend?”, “How much capital should I use?” “What are the strategies I should integrate for this trading market?”
Knowing the answers to these questions can help you to understand the right day trading plans.
Practice Effective Money Management
You should know how much money you are ready to allocate for your first trade. Even though you have saved $100,000 for trading, you should not trade the funds altogether. Practice, plan and structure your trade before you spend your trading capital.
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