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Nine Tips For Day Traders

If you get into day trading, you will be involved in buying and selling securities over the course of a single business day based on the small fluctuations in the price of stocks. Day trading is the most common phenomena in foreign exchange. This is because the increased volatility offers the chance to make a handsome profit within a short period.

Day trading, however, is a risky practice. This is due to the volatility of the market and the fast speed required to day trade. Day trading is better suited to experts over beginners because it requires in-depth market knowledge and strict attention.

We are going to check out some valuable tips for day trading in this post. Before we do so, we cannot overemphasize the importance of market research and market observation.

1. Know what you are doing

If you are to succeed in day trading, you must possess strong market knowledge. Whatever it may be, forex or stocks, it always pays well to be attentive to global events and news. One of the reasons why trading is so fascinating is that virtually any event in the world has the potential to pip movement.

In global news as an example, Canada’s journey to marijuana legalization saw shifts in legislation leading to cannabis stocks doing well on the market and posting significant gains. Imagine the number of day traders who made or lost money post that announcement.

A market can be swayed by news related to interest rates, governments, central banks, trade agreements, or even a threat to civilian safety. If you assiduously follow all news related to the market of your choice, you will be in a commanding position to act when the moment is right.

2. Make a smart budget

Successful and competent day traders swear by their budget. How much are you comfortable with risking on each trade? How much of leverage do you have access to or want?

Most of the successful day traders will routinely risk less than 1% or 2% of their account in each trade. If you possess a $20,000 trading account and are OK with risking 0.5% of the capital, then your maximum loss per trade works out to $100.

Your budget dictates how much money you can risk without any personal or financial consequence.

3. Ensure that you have enough time

During the course of day trading, traders are required to pay close attention to tiny and transitory details throughout the day. If you do not have the necessary time to spare for day trading, you might want to skip it until you have enough free time to take in the machinations of the market.

Market tracking and opportunity spotting require fast action on your end. If you are caught up and busy with other commitments, you will miss the opportunity.

4. Be satisfied will less as a novice

If you are a rank beginner in the day trading scene, you should refrain from investing in too many forex pairs or stocks at a time.

As you will have fewer investments to track, you will find it easy to make smart trades. Additionally, if you stick to a particular area of expertise, your market knowledge will be strengthened, allowing you to trade with a lot more confidence.

5. Skip the rush hours in the beginning

There will be a market rush at the beginning of the day and also at the end of the day. There is considerable price volatility due to an influx of orders being placed when the market closes and opens.

An experienced trader has the skills to spot patterns during these rush hours and understands where to trade.

Since you are a novice, it is better for you to watch these rush hours taking place. We recommend not making any moves for the first 20 minutes of the market’s opening and also steer clear of action during the last 20 minutes before the closing bell. This is why we advocate that you give yourself dedicated time to day trade.

The most stable period in the middle of the day. Beginners will have the best chances of successful trades in this time. Rush hour is for the sharks.

6. Be careful of penny stocks

Penny stocks might sound demure with their cheap going rate, but be cautious because they are also one of the riskiest commodities on the market.

Penny stocks are notorious for their lack of liquidity; this makes it easy for imaginative traders to engineer or hype up the prices in stock by “pump and dump” methods.

7. Set up limit orders

Online traders use limit orders to automate their trades. This also allows them to set realistic market exit and entry points that are aligned with their budget. Limit orders are a method by which your buys and sells can be automated while at the same time limiting how much you potentially lose based upon your inherent risk tolerance.

8. Have a plan, be realistic

You won’t find every seasoned professional winning all of their trades. As a matter of fact, a lot of traders win only 60% of their trades at maximum, even though they are following their preferred strategy. Your target is to have a balance that will heavily favor the winning side than the losing side. If you are making more money on your wins than your losses, then it makes it easier for you to absorb the losses.

Have a pre-established percentage of your account to which the risk on each trade is limited. Stick to your market strategy with pre-arranged entry and exit points. This helps you to be somewhat immune to market excitement.

Success will come if you are comfortable in the hectic pace of the environment. Be faithful to your trading strategy; it will enable you to navigate the fast-paced market. If you have discipline, it will encourage you to stick to your strategy over chasing unreal profits.

9. Use all your resources

As an example, spread betting allows you the chance to speculate upon the pip movement of a Forex or stock pair without you entirely investing in it. This allows for a lot of flexibility and makes day trading more accessible to traders who wish to negate the full stock costs and dealing desk fee charges.

You will find thousands of free resources for both established traders and newbies. If you understand the market thoroughly, you will be in a unique position of strength when it comes to day trading.

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