There was a time when trading was earmarked for people working at trading houses, financial organisations, or brokerages. However, the growth of online trading platforms and better access to the stock market have opened up opportunities for trading, even for rookie investors.
Day trading involves purchasing and selling financial securities within the same day and can be a profitable avenue when played correctly. If you're keen on starting as a day trader, here are a few strategies you can use to your advantage.
A successful trader never stops learning. To begin your journey in day trading, it is not just enough to learn about the stock market and the day trading procedures. Thanks to the internet, it is easier to be up-to-date with the latest events in the stock market and keep up with the business, financial, and economic news.
As a day trader, you will have a small window to purchase and sell stocks. You need to be able to buy the stock when the price is low and sell it when the price is high within a day. To make accurate price predictions, you have to use technical analysis to your advantage by assessing historical pricing and identifying how the prices will move in the future.
As a newcomer in the world of trading, it is critical to outline a risk management plan upfront. This will help ensure that you only trade what you can afford to lose. A wise approach to risk management would be to trade with an experienced broker and establish a stop-loss level for every trade.
Determine and commit the number of funds you are willing to risk in each trade. Experienced traders risk less than 1-2% of their funds per trade. So, reserve a surplus amount you can trade and are prepared to lose, just in case.
As a beginner, focus on trading only one to two stocks in a session and test the waters. While yes, you can significantly benefit from even a slight price change when trading with a large volume of stocks, it is better to start with a small amount of capital and stocks until you find your feet.
The stock market should be approached logically; greed and uncertain decisions can be a recipe for disaster. You can manage this uncertainty by setting trading price targets before you enter the market. Target price is the estimate of a stock's future price. Once the stock price reaches this target, you can back down to avoid potential loss if the price suddenly turns against you.
Whether you're a beginner or an experienced trader, always make sure to fix a stop loss. Simply put, this is an advance order to sell your shares once it falls below a certain price. Thereby restricting your loss to the level of the stop-loss order.
Technology has transformed every sector, and the stock market is no different. As a rookie, you must make the most of the resources available to you. You can use online charting platforms to study historical trends and analyse the market. On top of that, mobile apps will allow you access to the stock market instantly so that you can even make trading decisions on the go.
Often, brokers start executing the day orders placed by traders and investors as soon as the market opens in the morning. This can be a good approach for experienced players who can easily recognise profitable patterns. But for beginners, it is best to understand and evaluate the market for the first 10-15 minutes.
Day traders tend to start their journey by trading stocks, but trading isn't limited to stocks only. Forex (trading currency pairs) and futures (an agreement to sell the underlying stock at an agreed price on a specified date) are two asset classes in India that have high volatility and liquidity, making them a good choice for day trading.
Day trading might look complex, but following these effective strategies combined with sound knowledge of the stock market can set you up for success. To stay up-to-date with the stock market news and research different investment avenues, check out the Moneyfy app.
Day trading can be profitable but is highly risky, especially for beginners. While some traders make significant gains, many face losses due to market volatility and the high pace of trading. Therefore, it's important to have adequate knowledge and experience and a well-developed strategy.
The risks of day trading include significant financial loss due to market volatility, high transaction costs, and the possibility of making impulsive decisions. Day trading also requires constant monitoring of the market, which can be time-consuming and demanding.
The basic rules for day trading include researching, strategising, risk management, discipline, and keeping up with market news and changes.
To practice day trading, study market trends, and test different strategies, and learn from simulated trades to gain experience and refine your strategy.
A good profit in day trading varies depending on your goals and risk tolerance.
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12 November 2024
5 mins read
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