Trading stocks for a living is a challenging yet high yielding job. There is a lot to grasp when a person is commencing his day trading career.
Some tips to keep an individual in the correct direction
These tips will guide a person to obtain proper equipment and software, decide what and when to trade, guide on the necessary capital needed, how to mitigate risk, and practice a trading strategy proficiently.
1. Selecting a Day Trading Market
All markets offer excellent profit potential; however, it all narrows down to how much capital a trader can invest.
Selecting a market will let an individual start focusing their education on that market. This would help save time and relentless efforts that would go into studying markets that may not be the one for a trader.
Don’t go towards mastering all markets at once. This will divide attention and delay money-making.
Once a trader adapts to a particular market, it is easier to adapt to learn other markets. Learning all markets altogether is not recommended. A trader can learn other markets later after mastering their priority of market choice.
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A trader can visit Alpaca to gain deeper knowledge on ways to trade stocks without falling into losses.
2. Equipment and Software
Before trading online, select the proper equipment and necessary software to trade on –
- Computer or Laptop – The computer should have enough memory and a fast enough processor to avoid lags and crashes. Software and computers are constantly evolving, so staying up-to-date with the latest technology will help a trader achieve desired results. A slow computer is more prone to crashing while operating in trades, causing a person to miss trades, or getting stuck in trades.
- Reliable and Fast Internet – Day traders should opt for a Cable or ADSL type internet connection; if a trader uses multiple web pages and applications simultaneously, the trading platform won’t reload as quickly as it should, and that can cause problems. A person can start with a mid-range internet package to test its limits. While purchasing a connection, inspect if the services go down frequently during the day; opt for a dependable internet connection provider.
- Pick the Right Trading Platform – Download numerous trading platforms and choose the best one according to a person’s preference. Being a beginner, one’s trading platform may occasionally change throughout your career, or necessary alterations would be made.
- Choose a Broker – Your broker facilitates your trades, and in exchange charges you a commission or fee on your trades. Day traders must focus on low-fee brokers as going for high commission costs would ruin a beginner’s trader’s profit statements. A couple of bucks extra on a commission is a worthy investment if the company can save you from bad losses in case of a computer meltdown or other unprecedented scenarios.
3. Time The Trade
As a day trader, be it a beginner or a pro, it all comes down to consistency. One way to maintain consistency is to never deviate from the same trading hours each day.
A couple of day traders trade for a whole regular session (9:30 a.m. to 4 p.m. EST), others only focus on a particular portion of the day. Trading only two to three hours per day is rather common amongst day traders.
Here are the hours to be focused on –
For stocks, the best time for day trading is the first one to two hours after the open, and the last hour before the close. This is a highly volatile time of the session, offering the highest price moves with the highest profit-earning potential.
The last hour of the day, 3 p.m. to 4 p.m. EST is also regarded as a good time for trading. If a trader only wishes to trade for an hour or two, they should go for the morning session.
For day trading futures, around the open is an optimum time to day trade. Good day trading opportunities usually commence a bit earlier than in the stock market.
If day trading futures emphasize trading between 8:30 a.m. and 11 a.m. EST, the best yield can be obtained. Futures markets have official closes at varying times, but the final hour of trading in a futures contract can procure promising moves for day traders to invest in.
The forex market is open for trading 24-hours a day during the week. The EUR-USD is the most recognized day trading pair. This currency pair witnesses greater trading volumes between 1 A.M. and 12 P.M. EST.
During peak hours, the London markets are open. Day traders should consider these hours while investing. The hours from 7 A.M. to 10 A.M. EST yield the biggest price moves, considering both the London and New York markets are open, making it a popular and active time to trade effectively.
Alpaca gives a trader a better visualization into extended hours trading and selects the best time to trade effectively.
4. Devise and Implement Strategies
No matter which market a person chooses to trade, opening a demo account and practicing strategies is the way to go. Merely knowing a strategy isn’t the same as implementing it.
It takes practice to fully recognize and understand trade setups and be able to execute trades without hesitation. Practice consistently for at least three months before trading real money. A demo account can give a trader some insights into the ideal time to trade, implementing the best bet, and making use of the rise and fall of stocks.
Pick a market that has more latency to trade. Then, gear up with the right equipment and software.
Select a time of day to trade, and only trade during that time. The best day trading times happen around major market openings and closings.
Manage the risk factor in each trade. Then, devise and implement a strategy over and over again. A person doesn’t need to know everything to trade profitability.
Focus on winning with a single reinforced strategy before attempting to learn others. Sharpen skills in a demo account, but always keep in mind the difference between a demo and real capital.
When switching to trading with real capital, a bumpy ride must be prognosticated beforehand. Focus on precision and intellectually traversing through the market to maximize profits.