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.