Being a day trader is just one of those things that sounds exciting. The concept is that you can be at home or anywhere, making fast-paced trades and earning lots of money doing it. Unfortunately for a lot of day traders, that’s not necessarily what happens.
You can lose money, and it’s risky, stressful, and it’s not lucrative for many people who try it.
That doesn’t mean it’s impossible though. It’s definitely possible, and there are plenty of people who do really well with it. If you can prepare yourself, you’ll be better equipped to be successful, and the following are some key things to know before you delve into the world of day trading.
Learn Everything You Can
A big reason a lot of day traders aren’t successful is because they don’t take the time to learn first. For example, if you want to learn how to choose a good penny stock, make sure that you look at what you need to know. Learn about how to choose these stocks based on concepts like volatility, volume, and how to identify catalysts.
If you don’t know a lot before you get started, you’re just guessing, and it’s probably not going to go well.
Don’t Plan On Doing It All Day
Most experts will tell you that in order to be a day trader you don’t necessarily need to be doing it all day.
You can easily do it within around one to three hours a day. Of course, there are traders who do it all day, but you’re probably going to get the best returns if you focus your work around two primary periods of time. The first is the open and the second is the close of the market.
Within the first thirty minutes after trading opens is when you’re going to see the most volatility and that’s where the opportunity is for day traders.
From around 3:30 pm to 4:00 pm you might want to trade as well since day traders close their positions before the ending bell rings.
Choose the Right Market
As a day trader, you need to make sure you choose the right market, and a lot of this is going to be based on your preference. Day traders usually focus on one of three markets, which are stocks, forex, and futures.
All have advantages and disadvantages, and each takes some time to learn the specifics about. It’s much better in most cases to learn all you can about one, and focus on it rather than trying to do it all.
Build Your Strategy
Finally, day trading isn’t something you can just wake up and decide to do. It’s important that you cultivate a strategy that you follow. This will not only make it easier for you, but you’re also likely to get better results.
It will take some trial and error to get your strategy right, but some things to think about in particular include how you’ll get into a trade, and how you’ll get out, and what position size you’ll take.
You’ll have to create your strategy then utilize it time and time again to see what the results are like, and where you can learn and change things.