Day Trading Strategies for Beginners
Day Trading leads to market positions which are held only the short time typically a trader opens and closes a position the same day, but positions can be held for a period as well. The position can be either long or short. A day trader is looking to take advantage of volatility during the trading day, and reduce overnight risk caused by events that might happen after the markets are closed.
Day trading is not all that difficult once you learn a simple, rules-based strategy for anticipating the market moves, such as that taught at Online Trading Academy.
8 Secrets to Day Trading for Beginners
1. Watch the scenarios where supply and demand are drastically imbalanced, and use these as entry points
The financial markets are like anything else in life. If supply is near depletion and there are still willing buyers, the price is about to go higher. If there are excess supply and no willing buyers, a price will go down. At Online Trading Academy, students are taught to identify these turning points on the price chart, and you can do a same by studying historical examples.
2. Always set price targets before you jump in.
If you are buying a long position, decide in advance how much profit is acceptable as well as the stop-loss level if the trade turns against you. Then, stick by your decisions. It limits your potential loss and keeps you from being overly greedy if price spikes to an unreasonable level.
3. Insist on a risk-reward ratio of at least 3:1 when setting the targets
One of the most important lessons in trading for beginners is to understand the proper risk-reward ratio. As the Online Trading Academy instructors point out, it allows you to “Win big and lose small” and come out ahead even if you have losses on many of your trades. In fact, once you gain experience, risk-reward ratios of as high as 5:1 or even higher may be attainable.
4. Be a patient trader
Successful day traders often don’t trade every day. They may be in the market, on their computer, but if they don’t see any possibilities that meet their criteria, they will not execute the trade that day. That’s a lot better than going against your own best judgment out of an impatient desire to “just do something.” Plan your trades, and then trade your plan.
5. Be a disciplined trader.
Again, you need to set the trading plan and stick to it. At Online Trading, students execute live trades in the market under the guidance of a senior instructor until right decisions become second nature. If you are trading on your own, impulsive behavior can be your worst enemy. Greed can keep you in the position for too long, and fear can cause you to bail out too soon. Don’t expect to get rich on a single trade.
6. Day trade with money you can afford to lose
Successful traders have a little bucket of risk capital and the big bucket of money they are saving for retirement or another long term goal. Big Bucket money tends to be invested more conservatively and in longer duration positions. It not forbidden to use this money occasionally for a day trade, but the odds should be very high in favor.
7. Never risk too much capital on one trade.
First set a percentage of your day trading budget and don’t allow the size of your position to exceed it. Otherwise, you may miss out on the better opportunity in the market.
8. Don’t second-guess yourself, but do learn from an experience.
Every day trader has losses, so don’t kick yourself when the occasional trade doesn’t go your way. Do, however, prove that you followed your established day trading rules and didn’t get in or out at the wrong time.