Day trading beginners often start by trying to figure out what a day trader is, exactly.
He’s the guy sitting at his computer in his pajamas only feet away from his bed and he’s clicking on charts. With seeming effortlessness, he makes decisions and money. This money grants freedoms to him only dreamed of by others.
He seems so far away from where most day trading beginners see themselves.
He is the stereotyped day trader.
Stereotypes can offer an apt description; yet, they often leave out crucial details. So let’s move beyond superficial elements and look at 5 must-know basics of day trading.
Day Trading Beginners – Basic #1: How do I day trade?
Strategy underlies success. Moreover, day trading well depends on effective application and execution of strategy.
Day traders who succeed choose well and stick to strategies that work for them. There are many from which to choose.
Just some of the strategy types you can use are:
- Range based
- Indicator setups
- News based entries
- …and many, many more.
They are all among the effective tools for the experienced trader.
Success is contingent on simplicity in an overwhelming majority of cases. Some traders succeed with any one of the strategies mentioned above. Some even combine several.
Nobody succeeds in an attempt to do them all.
Here’s a personal example. I like trading TAS Market Profile based breakout and continuation strategies. I apply them to high volume futures contracts.
That means I am ignoring 99.9% of the other trading strategies and asset class combinations out there.
For you to achieve your trading goals quicker and with less complication, choose to focus. You do not need 10 trading strategies to succeed. You don’t even need 2.
All you need is one effective day trading strategy to start. Add more strategies with care, and test them well before you do. It’s better to be a master of one than a dabbler in many.
Day Trading Beginners – Basic #2: What is momentum trading?
Momentum is the rate that prices fluctuate. The vast majority of day trading strategies incorporate momentum. The notable exception to this is reversals.
If the current speed that the price is increasing keeps up, the price will be __(insert price) within __(insert time).
Understanding momentum in trading is very important. It specifies a day trader’s expectations of what is possible if they enter a trade. A general rule is the more momentum, the better.
“A trade without momentum is like a car without gasoline… it’s going nowhere fast.”
Two words that are mainstays in trading are “trend” and “momentum.” Compared to a river, the trend is the direction the river flows, and the momentum is the speed of the water.
Get the best trading results by paying attention to both the trend as well as the momentum of the price action.
Day Trading Beginners – Basic #3: The real definition of a day trader
The late 1990’s and early 2000’s had an exact definition of the day trader. A day trader was someone who had specific strategies.
Years passed and the term morphed into a broader description. This new definition was of someone who starts and finishes a position on the same day. A day trader always goes to bed with only cash in their account.
Today, the term “day trader” is even more overarching. It includes anyone who seems to trade in an active hands-on manner.
There is a lesson to learned here…
Too many people get caught up in the label. I cannot think of a single trader who was more profitable because he considered himself a “day trader”. The same applies to “swing trader”, “position trader”, or any other trading-based label.
Simplify things and leave it at “trader.” That’s what I do. It has helped me, and many others who adopt the same mindset, get on with the more important aspects of trading.
Day Trading Beginners – Basic #4: Is it smart to play penny stocks?
Penny stocks are a very specific subset of stocks. They have unique price action characteristics. The attraction to pennies for many new traders includes the ease of access.
The appeal is due to low price and what they view to be a disproportionate upside potential. And the fast speed at which percentage price changes fuels that illusion.
But there is nothing that makes penny stock trading any easier. Nor is there anything that makes it more profitable or “smart”. There are plenty of other trading strategies and products that yield excellent results.
“Penny stocks aren’t a magical market, but they are as valid as any other area of trading.”
Are penny stocks a valid market to trade?
Yes, they are. Trading the pennies is as valid as any other trading method or strategy.
Curious about penny stocks? It would be wise to consider the reasons that penny stocks are appealing to you. Make sure you’re not looking at them as a Holy Grail market. Weigh the benefits against the strategy-specific risk to ensure a balanced investigation.
Day Trading Beginners – Basic #5: What’s the secret?
Experienced traders hate the question as much as green traders hate the answer.
Persistence and patience are the most important characteristics of a successful trader.
Trading attracts many people because of the large rewards compared to perceived effort. Creating the reality of reward is possible. It also takes a tremendous amount of effort to get there.
Even the shortest path to success takes persistence and patience. The reason why this is true is that success in trading happens over the long term.
It is quite possible for a trader to build a six-figure account and a healthy income. Please add a zero if six figures are not impressive enough for you. But any level of consistency requires a lot of practice and sticking with it.
Here’s the real secret…
The secret to success in trading is…YOU. The trader. Like all professionals, great equipment and instruction can only go so far. The more time that you invest, the better your trading results will get.
And those investments of your time are best served by going into knowledge and practice. These offer the best return on investment.
From Zero to Hero
Being a day trading beginner can be a daunting. But remember, every current expert started out as a beginner.
Give yourself the best chance for success by investing in your knowledge and ability. This should be your very first step. Do it before you risk even a penny of your hard-earned cash.
For more day trading techniques, tools & strategies, check out these articles:
- 3 Best Online Trader Training Methods
- How To Trade Online Stocks: 5 PDT Rule Tips
- 7 Steps To Options Trading Success
No matter how long the road seems, we all have to start somewhere. I wish I’d known these basics when I started out as one of many day trading beginners.
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