Day Trading for Beginners
For every game, there is a set of rules to follow. If you are a new player, it is important that you are well aware of the basic set of rules so that you can deter committing mistakes. Similarly, day trading has its important rules. If you are going to enter day trading, it is vital to know the set of rules and follow it in order to handle any possible event. More importantly, you must also possess the discipline to adhere to these rules.
This article will tell you the important rules crucial for novice day traders. These rules can help you in decision making and can give you broader guidelines.
1. Enter, Exit, Escape
To have an enter price, an exit price, and an escape price is the number one rule in time of worst-case events. There is a reason why this rule comes on top. Before pressing the “Enter” key, you must know when to get in, when to get out, and how to respond if the trade works against your expectation. Escaping a trade, also referred to as using a stop price, is important if you want to reduce losses. If you know when to get in or out, you will be able to lock in profits and avoid potential troubles.
2. First 15-Minute Rule
As a beginning day trader, you must avoid making trades during the first 15 minutes of the market open because this is often panic trades or market orders placed the night before. If you are seeking to make fast profits, it is best to wait a while until you are able to detect rewarding opportunities. Even seasoned traders sometimes avoid this time period.
3. Use Limit Orders
A limit order allows you to control the maximum price you will pay or the minimum price you will sell. You set the boundaries, which is why using limit orders is suggested.
4. Start Trading Without Using Margin
Using a margin means you are borrowing money from a brokerage company to trade. When used properly, margins help to increase the trading results of, not only, profit but also losses, if a trade goes against you. As a novice, keeping control on the amount of indulgence is important and trading with cash-in-hand helps to achieve that. Remember this: indulge in day trading without using margin. The high margin requirements for trading on margin also hinder many to trade on margin.
5. Have a Selling Plan
Lots of novice traders spend most of their time pondering about the stocks they want to buy without considering when to sell. Before diving into the market, you have to know in advance when to exit, hopefully with a profit. As a beginner, you need to set a price target as well as a time target.See also Checking on Your Trading Goals
6. Record All Your Trades
Most professional traders swear by their journal, where they keep records of all their trades, whether it be winning or losing. Recording by writing down what you did right, or wrong, will help improve your trading practices as a trader, which is your main objective, and learn from all your losing trades.
7. Practice in a Paper-Trading Account
Practice trading may not be considered important by some, but for other traders, it can be beneficial. Make sure to trade with a realistic amount of money when you open a practice account. It’s not a good idea to trade with a million dollars if the majority of what you have in your account is $30, 000. Additionally, if you are doing practice trade, think of it as an educational exercise, not a game.
8.Never Follow Tips from Uninformed Sources
Many experienced traders know that buying stocks based on tips from uninformed peers will almost always end up to making bad trades. It is not enough that you just know the stocks to buy. You also need to know when to sell, and by then the tipster is long gone.
9. Cut Your Losses
The key to surviving as a day trader is managing losing trades. Although you also want to let your winners run, you cannot afford to let them run for a long period of time. It is more of art than science to get it right, but learning how to manage or control losses is important if you are going to day trade. Once again, never forget the first rule mentioned above.
10. Have the Willingness to Lose Before You Can Win
Although a lot of traders can manage winners, controlling losing stocks can be difficult. Many novice traders panic at the first hint of losses and end up committing a series of impulsive trades that cost them money. If you enter day trading, you must be willing to accept some losses. The key to dealing with this situation is to know in advance what you will do if you are confronted with losses.See also Some Mistakes That Day Traders Should Avoid
Even though anyone can learn how to day trade, only a few have the discipline to make consistent profits. What causes many people to commit mistakes is their emotions, which is why it is so important to create a set of flexible rules. Your objective is to follow the rules to help keep you on the right track of your trading journey. Additionally, a sound understanding of some good day trading strategies can also provide a foundation for this endeavor.
You must be armed to the teeth with the best and most useful knowledge in trading. Visit Bworld Review to turn yourself into a sharper and wiser investor! Register an account now with BWorld and start your investment journey.