Day trading is one of the most effective ways to make money. How to start day trading should not be a decision one has to make in a hurry. As a day trader, you can generate a massive amount of money and live the life of your dream, but as a newbie in the world of day trading, you can lose a great deal of cash, uniquely if you don’t have the right knowledge. Usually, for first-timers, the first year is stressful, with a lot of disappointments along the way. So the aim for you in the first year is to try your possible best not to lose all your investments in a go. Just like starting any new career, there are a lot of things you need to learn before you fully commit yourself to day trading as a full-time job. I usually advise beginners to spend six months to a year day trading as a part-time job. After six months, then you can decide with the knowledge and experience you have acquired if you should turn it into a full-time revenue source or not.
So you are a newbie who has heard about day trading and you have seen friends and colleagues making a lot of money from day trading, and you have decided you want to try it out?
Then follow these tips on how to start day trading:
Choose a market to day trade
For someone who shows interest in day trading and wants to venture into it, you must pick a day trading market. The sole aim of day trading is to identify reoccurring patterns that can generate profit and then take advantage of it.
If you want to trade-in companies’ shares, then you would want to go with stock trading. But if you are interested in currencies, then the forex market is for you. Then there is a wide range of futures that you can trade on, which is mostly commodities and indexes.
If you choose the stock market, some of the companies whose shares you can trade on include Apple and Walmart. In the forex market, you can buy on currencies like dollar, pounds, euro, yen, etc. for commodities and indexes try crude oil, S&P 500, etc.
Bear in mind that none of this market is better than the other, and hence it boils down to what is it that you intend on trading and the capital you have to start. If you have a little money, then start with the forex market as it is suitable for small investors or traders. You can start with as low as just $200.
If you want to trade the futures market, then it is recommended you start with at least $1000. The stock market is more capital-intensive and requires a considerable amount of capital to start. If you want to trade this market, then you can start with $25,000 or more to trade.
For newcomers, try to pick one particular market and don’t try to trade all the markets at once. It will provide you with the opportunity to master the market you choose . because trying to trade all the market at once will only lead to divided attention and can cause you to lose your investment. So learn to be patient and trade one particular market for a time until you have mastered it.
Tools needed for day trading
To know how to start day trading, there are some tools you will require.
- The first tool you will need to start trading is a computer or laptop with enough memory, and that can process fast so that it won’t lag or crash when you are running a trading program. it doesn’t mean you have to buy the most expensive computer, but make sure your computer meets the above-stated requirements. A computer that is slow to load will cause you to lose money when you are day trading.
- Again as a day trader, you will need a reliable and high-speed internet connection. I will advise you to go for a cable or ADSL internet connection. The speed of your internet connection is very vital when you are day trading. Let us say, you are trading the forex market, the prize of currency pair changes within seconds, and using a slow internet connection can make you miss out on a potentially profitable trade pr can even make you lose money due to not closing trade on time because of slow internet connection. So always go for the most reliable and fast internet service provers in your area.
- Get a suitable trading platform. For someone just starting to day trade, looking for a suitable day trading platform can be a difficult task. So I would advise you to explore many platforms until you find the one that is suitable for your trading style and market. There is a lot of trading platform out there; just do a simple google search and download several options to try out. You will get one that is suitable for your market and style. You can also seek advice from your chosen brokers; you can even see some options on your selected broker’s webpage.
- A reliable broker.
- A starter in day trading, you will need to choose a reliable broker. It is your broker that will facilitate trades for you. They will charge you a certain percentage or fee as a commission on your trades. You should choose a broker that has a low fee or commission since high commissions can affect your profit for the day. But don’t just pick a broker because of their small fee or commission doesn’t translate to them being the best broker for you. Choose a broker that will offer support to you should in case you need it, and you will sense you are a new trader. It is better to spend a couple of cents on fees if the company can help you to save more money from trade because of a computer crash and other unforeseen circumstances. Some banks offer broker accounts, but they are not the best account for a day trader, especially for a beginner.
- when to day trade
- For someone who is day trading, you must familiarize yourself with the right time of the day for you to day trade. You have to be consistent with the time of the day you have chosen to trade. You need to ensure you make your trade at the same time each day.
- Can choose to trade a whole session (9:30 A.M -4 P.M), or you can choose to trade only two to four hours a day. Just make sure whichever one you decide, stick to it.
- You intend to trade the stock market; then you should trade from the first one to two hours after the pen and the last one to two hours before the close. That is the time that you can get good trades (9:30 A.M-11:30 P.M EST). It is the most volatile time, and you will get more profit.
- You want to day trade futures, then try around the opening. Suitable trading starts early for futures as compared to other markets. You can also try the last hour of trading.
- you prefer to trade the forex market; then you should trade mostly from 0600 and 1700 GMT.
for a beginner, these are some of the ideas on how to start day trading.