As easy as it sounds, Day trading is speculation in currency trading, specifically buying and selling financial instruments within the same trading day, such that all positions are closed before the market closes for the trading day. Traders who trade in this capacity with the motive of profit are therefore speculators.
A life of a day trader has no difference from a self employed because it requires a trader to spend most of his time of the day trading various instruments or doing research on the fundamental aspects that will potentially provide movement on the charts. This also means when a day trader is not at his desk he is not making money. The survival of a day trader depends on the amounts of trades he or she can make before the market closes and the ratio of winner or losers on that particular day.
So the title of the article say’s how to start day trading.
- Day trading is only profitable when traders take it seriously and do their research.
- Day trading is a job, not a hobby or passing fad of a pastime. Treat it as such—be diligent, focused, objective, and detach emotions.
- Here we provide some basic tips and know-how to become a successful day trader.
You will need a stable broker that can handle large number of orders at a single interval. I mean fast execution speed of 0.35 seconds. If you haven’t got one the click this link to sign up
- Invest in Knowledge/Knowledge is Power
In addition to knowledge of basic trading procedures, day traders need to keep up on the latest market news and events that affect currencies or stocks, the Fed’s interest rate plans, the economic outlook, etc. So do your homework. Make a wish list of instruments you’d like to trade and keep yourself informed about the selected instruments. Scan business news and visit reliable financial websites. However if you are typical new to trading then invest in the knowledge by getting educated.
- Set Aside Funds/Capital.
Assess how much capital you can afford to risk on each trade and set the amount special for trading activities. Normally day traders usually risk some around 0.5% to 2%. So find a reasonable amount that can provide you with good returns even if you risk 1% per trade. For many traders i come across with have issues with capitalization so check out this episode HOW TO GET YOUR FIRST $1000 CAPITAL, It can help you get started.
- Set Aside Time.
As i said earlier that day trading consumes a lot of time mostly daytime since you spend the whole day on the screens. So if you are employed elsewhere then this is not a path to opt since you are going to occupied through out the day. Opportunities can show up any time of the day and you have to ready to execute markets move very quickly so do you.
- Start Small.
Always start small and build up over time. Even if you have access to capital and leverage of up to 1:2000 doesn’t mean you should go big on the early days.
- Avoid Exotic Pairs
These exotic pairs are very expensive to trade due to high volatity and low volume. So spreads are very high and commissions also. For a day trader these pairs are not practical at all. You should focus on major pairs that are traded by many traders all over the world. They offer low spreads and there is less manipulations. Check out this lesson on Understanding Volume And Volatility.
- Cut Losses Early
Many traders never cut losses early resulting to bleeding up so much make use of your stop loss to prevent major catastrophes on your account. Check out this lesson on Understanding The Concept of a Tight Stop Loss
Why Day Trading Can Be So Tough?
Day trading takes a lot of practice and know-how, and there are several factors that can make the process challenging.
First, know that you’re going up against professionals whose careers revolve around trading. These people have access to the best technology and connections in the industry, so even if they fail, they’re set up to succeed in the end. If you jump on the bandwagon, it means more profits for them.
The Government will also want a cut of your profits, no matter how slim. To Some traders in other countries still yet not pay taxes but Remember that you’ll have to pay taxes on any short-term gains—or any investments you hold for one year or less—at the marginal rate. The one caveat is that your losses will offset any gains.
As an individual investor, you may be prone to emotional and psychological biases. Professional traders are usually able to cut these out of their trading strategies, but when it’s your own capital involved, it tends to be a different story.
If you find day trading is the best thing for you then all the best and good luck.
Raymond is a professional currency trader with experience of 4 years trading the financial markets. Certified Risk Manager and Contributor at profxtigers.com
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