5 Day Trading Tips for New Traders
Day trading has become more popular in recent years, for a number of reasons. There are a number of reasons for the rise in popularity, but it is largely to do with the rise in the availability of information and access to trading platforms. Whereas most forms of investing involve playing the long game and take time to mature, day trading is all about buying and selling financial products within the space of a day.
This much more rapid-fire approach to investing has earned it popularity amongst those who have traditionally had little interest in investing. It should be noted that day trading is definitely not a get rich quick scheme; like all types of investing, it carries with it a number of risks that investors need to be aware of.
Make Sure You Know What You’re Getting Into
Before you dive into the world of day trading, make sure that you know exactly what it is that you are getting yourself into. Many people have tripped themselves up by diving into day trading before they are ready. Some are under the impression that day trading is somehow safer or less risky than other investments, but this isn’t necessarily the case.
Not only do you need to make sure that you understand the risks of day trading, but you will also need to know what the financial instruments available to you are, as well as what the available trading platforms are. Finding the right platforms can make a huge difference to your success as a trader. This makes sense when you think about it; the easier you find it to use the platform and read information from it, the easier you will find it to make the right investment decisions.
We would recommend you check out InvestinGoal for reviews and guides to trading. Their review of Markets.com should give you a good idea of what their reviews are like, and will demonstrate their value. Not only do they have reviews of various platforms, but they also have plenty of investment guides that day traders will find helpful. If you hope to go beyond day trading one day, we would suggest that you go over those guides.
Work Out Your Investment Capital
Before you can think about doing any day trading, you need to have a firm grasp of exactly how much money you have available. Not only do you need to know how much money is available to you, but you will also need to know how much of it you can afford to spend. It’s important that you also know what your spending limit is i.e. the amount of money that you can afford to invest.
The average day trader risks something in the region of 1-2% of their investment capital on any individual trade. So, if you have $100,000 of investment capital to use, 1-2% would be $1-2,000. It’s up to you what limits you set, but you should put some thought into them.
Make Sure You Have Time
If you want to begin day trading, you will need to ensure that you have enough time in the day to set aside for it. Serious day trading will take up most of your day, so you will need to spend at least as much time with it as you would with a regular job. If you only have a limited amount of time to spend on your day trading, you won’t be able to make serious money from it.
When you first begin day trading, as with anything else, you won’t be doing it to the best of your ability. It takes some time and experience to understand the markets fully and to find your groove with investing. By starting small, you will give yourself the time and space you need to develop your abilities and work out the nuances of the particular markets you enter and the platform you use to trade.
Avoid Penny Stocks
Penny stocks have long been a popular investment option for new traders, but they should be avoided. They might be cheap, as the name implies, but they are often illiquid and are very unlikely to bring you any returns at all. Stocks that begin trading below $5 are likely to be removed from major exchanges, which could leave you stuck with stocks that you have no way of selling. Instead, stay away from penny stocks and instead focus your attention on more valuable investments.
Anyone with some startup capital to invest with can begin day trading, but it isn’t something that you should dive into without taking time to prepare. As long as you don’t rush into day trading, and you are prepared to start small and work your way up, it can be an effective first step towards greater financial independence.