Deciding to delve into day trading shouldn’t be a decision you take lightly. While it is possible to earn a good living through trading just a few hours a day, it will likely take you years to reach that point. The first year is the roughest for new traders since they’re still learning. Here are a couple of tips to help you make fewer mistakes during your first year of trading.
Learn to Create Strategies
At first glance, day trading is something that can be done on a whim. Buy low, sell high seems like an easy enough concept, but there are many factors that green traders forget to address. To hone your skills in technical analysis and developing a strategy, you should watch live charts. Plot trades you might make and track their progress. How would you get out? How much risk does the trade assume? Knowing the answer to each of these questions is integral to being successful at day trading. The answers to these questions and more, can be found at Warrior Trading. They have valuable YouTube videos and great content throughout their site.
Practice Makes Perfect
You should be practicing any trades you plan to make well before you actually execute them. Make sure the strategy seems sound and like a winner before you double down and make the trade. Practice is done in demo accounts before any real money is put on the line, making it an excellent way to practice strategy and chart reading. No two trading days will be the same, which is why the best day traders practice strategy in all kinds of conditions.
Understand the Requirements
Day trading stocks require starting capital to begin. You legally need at least $25,000 to begin day trading stocks in the United States. However, you will also want a buffer to give yourself breathing room. For forex trading, there is no legal minimum, but most forex traders recommend starting with $5,000 or more. Day trading futures is a different beast altogether. It is recommended you have at least $2,500 to start, but $7,500 to $10,000 is the recommended range for trading futures. Making money on these small amounts is not easy, but it is possible.
When first starting out, it can be tempting to go all out and quit your day job so you can focus on chart reading. But that’s a bad idea unless you have some other means of support. You shouldn’t give up your day job until your trading activities replace your income. The trading strategy you design should be tailored around the time of day and your needs. Becoming consistently profitable as a day trader takes several hours of practice each day. Most traders see some limited amount of success by the six-month mark, but only the truly dedicated excel at day trading for a living.
Make sure the broker you choose is designed to accommodate your day trading actions. Day trading focused brokers will have demo accounts that can help you learn the ropes without risking any real money. Thinkorswim is an excellent platform for this, and it comes with a 60-day free trial.