Some years back, active trading in the stock market was only done by people working for trading houses, financial institutions, and brokerages. With the advent of the internet and the rise of online trading houses, brokers have simplified matters for the average investor willing to go into trading.
Day trading can be very profitable if you know how to go about it properly, and very common in the Australian market. Day trading is the buying and selling of a security within one trading day. This type of trading requires you to close out all positions at the end of each working day and then starting all over the next day. Day trading is not confined to a single market, but it is common in stock and forex( foreign exchange) markets. Day traders buy and sell many assets in one day, or even several times in a day. They use these tactics to take advantage of any price movements, no matter how small, in currencies or liquid stock.
As a day trader, you have to be a fast decision-maker, and be ready to execute several trades for a small profit every time. If you want to make it as a day trader, here are some day trading tips to guide you:
Be Knowledgable
While you may possess some knowledge in necessary procedures in forex and stock trading, as a day trader, you must stay updated about other matters. You need to be up to date with the latest events affecting stocks, the latest stock market happenings, the state of the economy, and other things concerning the market. Do your due diligence.
Write down a list of stocks you would like to trade in the future and stay informed on these companies and the market in general. Read business news and check out trusted financial websites to learn more about market trends.
Set Some Funds Aside
Evaluate how much money you are willing to wager per forex or stock trade. Most successful day traders do not risk more than 1% to 2% of their account for every business. Set aside an extra amount of money you can use to trade with and which you do not mind losing in the event things go south.
Spare Some Time
Day trading needs not only funds but also time. The reason it is called day trading is that you need to have your days cleared for it. If you have a limited time frame each day, then day trading is not for you. You have to have time to track the markets to grab opportunities that may arise at any time of day during trading hours, and you have to move fast.
Start Small
If you are a beginner, you must focus on at least one or two stocks during a session. When you have a few stocks, it is manageable to track and easier to find any opportunities. Of late, the trend of trading fractional shares has become common. Fractional trading allows you to point out particular, and smaller dollar amounts you want to invest. If for example, a specific company’s shares are trading at $300, and you wish to buy $50 worth of shares, most brokers will allow you to purchase one-fifth of one share.
Stay Clear of Penny Stocks
You will be on the lookout for low prices and deals, but you must stay clear of penny stocks. Penny stocks are shares of small public companies that trade at meager prices per share. Penny stocks are illiquid, meaning they are not quickly sold or bought. Most of the stock that trades under $1 per share on ASX (Australian Securities Exchange) are delisted from the Australian Securities and Investments Commission (ASIC) and can only be traded over the counter. This is unless you have spotted an opportunity that will be profitable. Some examples that have been listed as penny stocks and are doing well include the Ziocom group Limited, Splitit Payments Ltd, STEMify Ltd.
Be Realistic On Profits
If you have a strategy and it doesn’t win, don’t fret about it. For a strategy’s profitability, an approach doesn’t have to win every time. Most traders win between 50% and 60% of the forex or stock trades they venture into. They make sure they limit every risk taken on each trade to a specific account percentage. They also ensure their entry and exit plans are written down and laid out.
Conclusion
Day trading is not and cannot be a hobby. You have to be intentional about it and be committed to it. Since you have to keep watching the market trend for open opportunities, you must have a lot of time during the day to dedicate to this venture.
