Interested in learning some day trading strategies for dummies? I remember when I started day trading back in 2010, I was a complete novice and coming up with a good day trading strategy was very difficult for me considering I was utterly naïve in the idea of day trading. I spend a lot of money, time and effort trying to get the best day trading strategies available. My friend Brian who was at the time an experienced trader wanted to help me out, but still I wasn’t improving, and as a result, I lost a lot of money and spend a lot of time without gaining any profit. Years later am now an experienced day trader with a good day trading strategy that works for me.
I have noticed that there are a lot of newbies out there who want to start day trading but are struggling to come up with good trading strategies that will work for them. Coming up with a good plan as a newbie can be stressful, which is why I have decided to give you some good day trading strategies to help you kick start your trading career.
These are some of the general day trading strategies you should adopt when trading;
1 News and Trends
Be current with latest news and trends as a new trader; you should first have basic knowledge of trading. Also, you need to be up to date with the latest markets news and as well as trends. You need to be current with information that affects stocks, forex and futures markets. Look for a report on the FED’s interest rate plans, etc. carry out research, tabulate a list of the stocks you wish to trade and look out for news that will affect the movement of their prices. Always monitor the companies whose shares you want to buy or sell.
2 Trading Funds
Analyze how much of your investment capital you are willing to use on a particular trade. Experts advise you risk not more than 1% of your investment on a specific trade. Assuming you have a trading account of $50,000 and you decided to risk 1% of your capital on each trade, then the maximum amount of loss per trade is $500. Make sure you set aside additional money you can trade with, and you can afford to lose.
3 Invest Your Time
As a day trader, you will need to invest much of your time as day trading involves a lot of time. If you are not prepared to put more of your time into your day trading career, then be prepared to lose your money. The process of day trading involves a trader tracking the markets and be able to identify opportunities, which can come up at any time of the trading period.
4 -start little
One mistake that most beginners do when they start day trading is to focus on more than two stocks during trading. You should start with a maximum of two stocks as this will make tracking stocks easier for you. Many brokers will allow you to purchase fractional shares; This means if a company share is $250, then you can buy one-fifth of the shares if you only want to buy $50 worth of shares
5- stay away from penny stocks
This is one of the most important day trading strategies for dummies. I normally advise newbies to stay away from penny stocks. Yes, they are cheap but in most case illiquid, and you have less chance of hitting the jackpot with these stocks. Most stocks that go for a price below $5 a share or are delisted from major stock exchanges, and you can only trade them over-the-counter.
6- timing is key
You may have heard before that timing is critical in day trading. Execution of orders that were placed by investors and traders usually begins as soon as the markets open in the morning. This often results in volatility. For an experienced trader, this is the best time to identify a pattern and pick the right stock to maximize profit. But as a beginner, you should wait and observe the market for at least 20 minutes. The less volatile hours are usually the middle hours, after approaching the closing bell. You may be tempted by the rush hours since they offer more opportunities. But it is for your good that you avoid those as a beginner.
7 -the decision of cutting losses
This is also one of the most important day trading strategies for dummies. For a beginner, deciding the type of order to use to enter a trade or exit them can be confusing. You have to decide whether to use market orders or to use limit orders. With a market order, once placed, it will execute the trade at the best price available in the markets at the time of execution.
A limit order enables you to place your trade orders with more precision whereby you set the price for buying as well as selling.
8 -your profit margin
As a beginner, you may be easily carried away by the profit you make from each trade and then become emotional, which may affect your trade decision. It is not every time that your trading strategy will result in winning. If you get to profit from 50%-60% of your trades, then it is a useful trading session. If you make more money on your winning trade than you lose on your losing trade, then you should be fine. Ensure you limit the risk on each of your trade to a specific percentage of your investment, ensure as well that your entry and exit is clearly defined.
9 check your emotion
Emotion is one essential aspect you need to take care of as a day trader. Don’t make decisions on any trade based on your emotion but carefully analyze the market. The market can test your nerve on many occasions so try to keep your emotions in check. Control your fears and replace them with hope. Avoid being greedy.
10 have a specific plan
As a day trader, you should come up with a particular trading plan and stick to it. For you to be successful in day trading, you have to move fast but not necessarily to think fast. Develop a good trading strategy in advance and be disciplined and stick to it. Always follow your trading formula or plan. Don’t change your formula base on some emotion.
With these few day trading strategies for dummies, you can become an expert day trader in the next couple of months, depending on your commitment to day trading. Good luck on your journey to becoming a successful day trader.