Day trading tip

Day trading refers to selling and buying of securities and assets within the same trading day. A trader pursuing day trading will open multiple trades and close them on the same day. They do so to reap the benefits of short price fluctuations that take place in the market. They do not keep their positions overnight to escape charges and mitigate the risks.

Let us take a look at some of the best and most crucial day trading tips for beginners.

1. Knowledge and research

Apart from the basic knowledge of trading, a day traders need to work in detail to enhance their skills. A day trader needs to keep up with the latest news, happenings, and announcements in the market to make the most out of it. At the same time, one cannot invest a massive sum of money without pursuing dedicated research. Therefore, a day trader needs to know in and out of their trade and various strategies that can help reap good returns.

1. Starting small and sweet

Since you're just starting with your day trading, you need to focus on one or two stocks each day—Trade only one or two assets in each session initially. And as you become comfortable with placing trades at fluctuating prices, you can go for more trades in a day. This is one way you can minimise risks and mistakes in the beginning.

1. Setting aside the funds.

Analyse how much money you are willing to risk on each trade. Most successful day traders risk up to 2 percent of their entire account on each trade. When you start day trading, you should use the funds that you are prepared to lose. Keep in mind that your invested funds may not come back or may not reap expected returns.

1. Setting aside time

The reason why trading is called day trading is that it requires your entire day and attention. If you can passionately dedicate most of your time to analyse different positions, charts, patterns, and prices, then day trading is for you. But if you are not ready to give your full attention and time, then you may not be the right trader to pursue day trading.

1. Timing your trades

Many orders and positions begin processing as soon as the market opens. This leads to increased volatility in the market. An expert trader may be able to recognise patterns of the abrupt volatility and take advantage of them. But for a beginner, it might be a bit challenging, and one might invite high risks. So it is better to malaise and read the market for about 10 to 15 minutes when the market starts.

The middle hours of the market are most of the times less volatile than the closing and beginning hours. Though rush hours can help in maximising day trading profits, newbies should avoid them at first.

1. Use limit orders

A day trader needs to precisely decide what limit orders are suitable for the trade positions. You must decide if you want to place limit orders or market orders. There is no price guarantee with a market order as it is executed on the best available prices.

A limit order provides a guarantee on price but is ambiguous of execution. Limit orders provide precision and help in mitigating risks when you set realistic price limits.

1. Avoiding penny stocks

Yes, as a day trader, you might look out for good deals at reasonable prices, but try to stay as far as you can from the penny stocks. These stocks are available at a lower price than the market price and are not at all liquid. They have very few chances of hitting good returns.

Most of such penny stocks become delisted by major exchanges. Until and unless you see an actual neck-grabbing opportunity, do not fall for such stocks.

Conclusion

Day trading is a risky business but can lead to high profits in the short term. The main thing to remember is making a viable and precise trading plan and sticking to it. Often whole day trading, traders let fear and greed overcome, and they sell short or stay longer in the trade than the original plan. One must stick to the plan with utter dedication and discipline. That is the only way you can suffice day trading for an extended period of time.

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