Good Morning,
Are you a forex trader who loves starting and closing a trade within one day?
Does market analysis fascinate you And most times, you find yourself in an excellent position to monitor markets throughout the day?
This is your beginner’s guide to Day Trading.
What is Day Trading?
Simply put: Day Trading is buying and selling a security on the same day. Usually, the trader closes the day either at a profit or loss.
Meanwhile, successful day traders take advantage of short term trading strategies using high amounts to leverage. This strategy yields high profits once you capitalize on compact price movement in high liquidity markets. For those who don't understand the ins and outs of long term trading strategies, day trading could be their best shot.
Key Points - Day Trading for Beginners
- Traders employ several day trading strategies to profit off-price changes.
- Most strategies take advantage of market inefficiencies.
- Day trading features high technical analysis.
- A good day trader needs objectivity, focus and self-discipline.
Forex Day Trading is not for you if:
- You like executing short term and long term trades
- You lack enough time to analyse markets during the day. (This loosely translates to not having a day job)
- You lack clear objectivity
LEARN HOW TO MAKE PROFITS FROM DAY TRADING
Reasons to Start Day Trading
Easy to Learn
You do not have to invest in elite education to begin day trading. Studying the patterns of demand and supply is enough to get you going. You only consider the patterns for that particular day. A day's mistakes will help rectify the next day's strategy. Unlike short term and long term trading that take months to identify a mistake.
Low Capital Requirement
Unless for the “pattern day rule”, that expects US day traders to maintain a minimum balance of $25,000; Intraday traders have little capital requirements. You could trade with capital as low as $10. This amount, however, depends on your day trading strategy. Nonetheless, brokers offer high leverage considering that traders will close by the end of the day.
No Overnight Risks
You need not carry forward your risks into the next day or week. Therefore avoiding a big cause for sleepless nights.
How to Start Day Trading? What are the Requirements?
Day trading does not demand a lot from newbies. However, several elements are ideal to be a consistent day trading guru.
Ideal Capital
You could build a startup out of your day trading venture if armed with enough capital. $10 could be the minimum amount for day traders. However, I encourage the startup capital of at least $500. A sizable capital will ensure you set a favourable lot size.
Tools and Software
A trading platform for monitoring real-time quotes, news feeds, charting tools and premium research. However, note that a trading platform could be tailored towards a given market. Say futures, currencies, options or stocks.
Indicators
Since you are a beginning day trader, I presume your intraday technique is not well developed. Nevertheless, having a unique day trading indicator will give you an edge in the market. In fact, the best indicators will set the stage for higher profits. Here a few:
- Velocity Finder - A next-generation indicator for comparing multiple time frames within milliseconds.
- Moving Average Convergence/Divergence (MACD) - An indicator for comparing different trend lines based on simple - moving averages. The MACD trading strategy reinforces a given trading
- Pipbreaker - This is the perfect trading technique for beginning day traders. It combines approaches from scalping, long term and short term trading.
Reliable low Spread Broker
Most breakers tend to offer significant spreads. This spread could be the cause of huge spendings as you continue day trading. You must find a reliable day trading broker that provides lower spreads and premium tracking tools.
The Best Day Strategies for Beginners
You should remain informed on the latest market fundamentals to become a successful day trader. These fundamentals should inform the better part of your trading strategy. An effective strategy will rely on in-depth utilisation of charts and indicators, future price movements indicators and detailed technical analysis. All strategies offer significant profits. Yet their implementation and how best one suits will determine the road your day trading will take. Here are the best day trading strategies for beginners:
Trend Trading
Trend trading involves observing longer time frame charts to determine a general trend. Once you establish the dominant market performance, you compress your day trading frame chart for trading opportunities taking a similar pattern.Counter Trading
Similar to Trend trading. Only that you identify the overall patterns and execute trades in the opposite direction. Day traders employing counter trading capitalize on trend reverses at the end of a tradeline. A reverse trade execution could have massive rewards but remains a lot risky.Breakout
Breakout also called box breakout. This trading strategy involves observing the range a trading pair has made during given hours. The trader then marks these ranges inside a box and places a trade on either side of the box. Well, the basis of this idea is to catch wind of a breakout on either side of the trend. This intraday trading strategy is useful when the pair is within a tight range. A range upon which it is preparing for a big move in any direction. Usually, breakout day traders maximise on support and resistance levels.Sentimental Trading
Sentimental trading is highly effective in the long term for serious intraday traders. Here is the idea. Once a bull or bear run takes place in the market. A given sentiment prevails in that market for a given period of time. The sentiment of the market helps professional traders identify how the market is thinking. Such a strategy informs the direction a trade is likely to take. While most successful traders have market fundamentals at the back of their mind, market sentiment remains at the core of their heart. An essential disclaimer to sentimental day trading is that sentiment has a finite life span. No one can determine when it will end or change in a given direction.
Bottom Line
To start day trading, pick a market that fascinates you and one that you can afford. Arm yourself with appropriate software and tools. Orient yourself with proper risk management practises, and believe me you are set for an exciting buck hunt in the world of day trading.
Hopefully, you have enjoyed today’s article. Thanks for reading!
Have a fantastic day!
Nisha Patel
Live from the Platinum Trading Floor.