Eight Top Day Trading Tips
I get a lot of questions about day trading, and most of the time...I tell people "don't do it." However, it's not for reasons you may think. I'm not against it. I know lots of people who do it, including my own brother (not as much anymore...but he used to do it a lot). It's because most people don't know how to do it, and if you don't know how...then it's just like gambling...you may "win" a lot and you may also lose...a lot!
So if you still want to day trade... then here are eight tips to help you get started...
Photo by Austin Distel on Unsplash
Always go in with a plan. This is the most important tip for trading, whether you’re looking at stocks or CFDs. Having a plan means that you know what you’re going to be buying and selling, how much you’re going to trade, and when you will trade it. With no plan, you risk making expensive mistakes.
Manage risk. You must sit down and come up with a plan for a risk management strategy. This will make sure that you only lose what you can afford. Without a strategy, your time in day trading could be a very short career.
Embrace technology. There are thousands of other traders out there, so you need to make use of all the resources available to you in order to stay ahead. Charting platforms offer a lot of ways to analyze the markets. Backtest your strategy against historical data to fill in any gaps. Mobile apps mean you get instant access to the market anywhere you can get data. Make sure you have a fast internet connection so you can make fast decisions.
Never stop learning. A trader who is going to do well doesn’t hang around. They’re always looking to trade in a smarter way. This means you need to stay up to date with the news, read trading books, and keep up with new trends and ideas. Markets evolve all the time, so you ought to evolve too.
Lead with facts. Your strategy should be based on, supported by and backtested with facts. Humans are led by emotions, and after a successful day, you might feel more brave when you return to the markets the next day. Avoid this trap. Use facts and figures to make your decisions, not your emotions.
Have rules for entry and exit. There’s no such things as the ideal entry and exit. Stick with the entry and exit parameters in your plan. If you start thinking about experimenting, think again. Stay disciplined, and your bottom line will be stronger for it.
Don’t concentrate on the money. It might seem counterintuitive, but it’s actually very sensible. If you’re putting all your focus onto the money, then you might make more reckless decisions, like taking smaller profits out of fear of losing what you have already won, or leaping in too soon so you don’t miss out. Focus on your strategy and stick with it. Let your strategy focus on making you money.
Take responsibility. A lot of traders lose and then claim that the market was the problem, not them. If you don’t take responsibility for a bad day, you can’t learn from your mistakes. Try to be constructive and learn. What did you do wrong? How can you avoid the mistake from happening again? Do you need to change your trading plans?
Would you like more information about day trading? If so, I'll bring in an expert to interview in the near future! Just let me know below by subscribing, commenting and send me an e-mail at hello@katychenmazzara.com. To get more information about financial freedom, subscribe below to get my weekly newsletter!