When you Day Trade (Buying and selling shares of a stock within the same trading day), it is imparotant that discipline approach since you don't have the luxury of time on your hands. Here are some factors that will help you in becoming a successful day trader.
Create a Trading Strategy
There are typically two different trading strategies: Discretionary and systematic.
Discretionary Trading- Your decisions you make are based on internal or external factors which you believe will make an immediate impact on the market.
Systematic Trading- Your decisions you make are based on distinct signals for buying and selling, also known as "rule-based" trading. Systematic trading will help keep emotions away since it is based on back-testing, historical data, and having a risk management system in place.
Have the Right Technology
It's important to have quality solid technology so you can keep up with the market moves within a given day.
It is very important to have a high-speed broadband internet connection and the right software that helps you visualize price, and analyze price charts in real-time.
With the right software which, along with these features, will allow you to place a trade order directly. Since you don’t have the luxury of time, every second matters.
Knowledge is Power
Most People will fail at day trading because their lack of knowledge and silliness to learn new things. Aim to learn everything about day trading as you can have a great understanding on how everything works.
You must know the market terminology, and have a thorough understanding of how to analyze a stock including technical analysis, and fundamental analysis such as PE ratio, EPS, and Price/Earnings-to-Growth ratio, among others.
You can learn from reading books, following blogs and watching youtube videos that are easily available online, and going through these on a daily basis can help you familiarize yourself with the various market terms.
Also, some brokers offer integrated courses on day trading, enrolling in which can help you in understanding the the process.
While reading and watching are helpful, actually trading is the best way to learn When you trade often, you will learn several key lessons which are not present in the books. Keep recording them by using a Trading Journal for better outcomes.
Distribute your capital wisely and avoid investing on leveraged money
Since market movements are hard to predict even for the soundest investor, make sure to start small so you are not risking your hard earned capital. One bad trade will allow you to live to trade another day as long as you start small.
Don't invest on leveraged money as it can affect critical life goals. Investors often feel that by making the right moves, they can double their investment overnight through day trading. This is nothing but a myth.
A cautious approach, coupled with discipline, is the recipe for success. Also, make sure not to give in to emotions and follow a herd mentality. Pick up fundamentally-sound stocks and avoid acting on free advice(s) which promise bumper returns.
This article was original published HERE and was slightly modified.