If you’re starting out in the markets, you have likely wondered how to day trade. To put you in the right frame of mind, we’ll start with a short story.
Imagine a former roommate whom you would trust to prepare a sandwich or instant noodles. You only trust them with this because it is the extent of their culinary experience. Now imagine that roommate comes to you wanting to open a high-class dining restaurant.
They also want to do it as fast as possible, with the expectation of making a lot of money.
You’re a bit startled, but still supportive. So you ask your friend where the restaurant will be, what it will serve, and how much it will cost to start the business.
This is the response you get…
“I don’t know but I’ll figure it out. I’ve seen other people do it. It looks simple, there’s lots of money in it, and it feels like a great opportunity.”
Exaggerated? It might be.
Uncommon? No. Not at all.
Small businesses and day trading have a big something in common. Too many people jump in with little to no training or experience.
You’re on your own if you want to start a restaurant. (I am only a small step beyond your instant-noodle-making friend). But here are 5 ways for you to learn how to day trade to prepare you the right way for this challenge.
How To Day Trade – Method #1: Enroll in a course or training program
For most people, taking a course or enrolling in a training program is going to be the most efficient way to start. Make sure that you look for a comprehensive course so that you can learn as much as possible.
Knowing the basics and getting practice is a huge asset in trading. Looking for a course that gets you the basic fundamentals you need, then look for one that gets you to practice a lot.
There are a huge selection of courses and training programs out there. It can be overwhelming to choose one. But the good thing is, they usually market themselves by the goal they will help you to achieve.
Goals can include learning a specific strategy. Or constructing your own customized trading plan. Having a specific goal to your learning prevents confusion and focuses your efforts.
I have written about the benefits of focus many times. This is what courses and training programs help you to do. If you chose well, you will get the most value for your money and make the best use of your time.
How To Day Trade – Method #2: Read books on day trading
Reading books on trading is an efficient way to learn. This is especially true if the books are about trading strategy and tactics. Trading biographies, stories, and interviews offer knowledge as well. But they are more for inspiration than for learning technique and methods.
“Books are still one of the best ways to learn how to trade.”
Remember to have a process in mind when searching for and reading books. Choose with care. Ask questions:
What is it teaching me? What can I do now that I have read the material? Does the person writing this have the right credentials and their own proven success?
Those are the type of questions that you want to have in mind to empower your trading.
How To Day Trade – Method #3: Get a trading mentor or coach
If you want the quickest route to becoming a successful trader, look no further. Finding trading mentors and coaches is the answer. But a few caveats keep it from being in the number one spot:
- Coaches can be expensive.
- Mentors can be costly and often unavailable.
- If you’re a beginner, your time may be better spent learning fundamentals from a course.
Another issue is that it can be hard to find good traders willing to either coach or mentor. Many are too busy trading their own accounts to want to help out. But aside from those caveats, using mentors and coaches is an excellent way to learn how to trade.
What makes coaches and mentor so effective is that they can customize your learning. They can fit it to your current level and can also focus on the exact goals you are pursuing. In some cases, you can even emulate their behavior and trading style.
Don’t overlook this important way to learn how to trade. I am sure you won’t regret the time and money you spend with coaches and mentors. I know I haven’t.
How To Day Trade – Method #4: Join an online forum or chat group
My personal distaste for online forums and chat groups is offset only by the fact that some of them are great. But the ones that I find respectable are the proverbial needles in the haystack. Most are time-wasting positive-psychology destroying nonsense.
Every trader has to decide for themselves. My suggestion is to move on fast if you find yourself or others arguing about trading related issues. OK, let’s sugar coat it and call it “debating.” Unless these debates make you a better trader, they are a true waste of your time.
[clickToTweet tweet=”Online trading forums can be good tools to learn, but beware debates and arguments. ” quote=”Online trading forums can be good tools to learn, but beware debates and arguments. ” theme=”style3″]
I will admit that when I first started trading, I engaged in some of these “debates”. It felt like I won a discussion or two over trivial issues like which moving average is best. My payoff for winning those arguments still hasn’t materialized. (It’s possible the internet sent my check to the wrong address.)
So choose with care if you decide to spend time in online trading forums. Some decent ones do exist (I even belong to one or two). But don’t waste your time arguing or debating. Get the information you need, share good information with others… and do no more than that.
How To Day Trade – Method #5: Research on the internet
Doing independent research on the Internet is quite low on my list of ways to learn. Don’t get me wrong. Free is an attractive price to pay.
But, it’s only free in the financial sense.
You pay for it in other ways like time and headaches.
Unguided research on the Internet lacks something. It’s the feature that I place in high regard in trading courses and training programs. That feature is focus and the benefit of focus is orderly contextualized information.
Here’s the type of issue that can come up.
- Source 1: “You need to avoid the news media. And forget about economic releases all together to maximize your trading results. News is noise and a waste of your time and attention.”
- Source 2: “Real-time news feeds from multiple sources are a definite must. Make sure you pay for the best services.”
That kind of seeming contradiction is enough to drive anyone crazy. Consider it in the proper context. I can think of two trading strategies where both statements are 100% correct.
And each of those strategies is successful yet different.
What hunting around on the internet lacks is a focus. Most of the time, the information that you are absorbing is not framed in the proper context. Internet sources can be ideal for simple definitions and the genesis of a strategy idea.
Use books, courses, training programs, coaches, and mentors to make significant strides. It comes down to using the right tools for your desired goals.
How To Day Trade – Method #6: Join a proprietary trading firm
I saved joining a proprietary firm for last because it demands the most commitment. Proprietary firms offer unique opportunities for traders to trade the markets. Benefits include attractive commissions, profit sharing, reduced capital requirements, and other resources.
And as it pertains here, most proprietary trading firms have training programs. They will teach you how to trade their methodology. Also, they reduce the amount of trouble you can get into by structuring your trading path.
[clickToTweet tweet=”It’s a big commitment, but you can learn a lot from joining a prop firm. ” quote=”It’s a big commitment, but you can learn a lot from joining a prop firm. ” theme=”style2″]
Most firms control the risks that you can take by limiting your transaction size. You can trade bigger size at these firms. But size comes after you have demonstrated skill and success with the smaller trade size.
Joining a proprietary trading firm often requires relocating. Most want their traders to be closer to the firm’s office. Joining also requires some up-front capital and a commitment to show up day after day.
How To Day Trade – Method #7: Start paper trading right now
Whether you believe you are ready, start paper trading right now. Paper / simulated trading is a risk-free way to test your ideas. Start getting experience now.
The opportunity to learn by doing is so important especially when it is free – both free of cost and risks.
You can paper trade through the “sim” account in Ninjatrader (see my full Ninjatrader review here). The paper trading account in Interactive Brokers works great too (see my review of Interactive Brokers here). Any platform or service that allows risk-free practice is an asset.
A spreadsheet or pencil and paper are also acceptable options as well. The point is practicing. You will learn an enormous amount about yourself by paper trading active markets. Start now. Start no matter what your current understanding or skill level.
Pay attention to the fact that the goal is learning, not making money. You learn the most by trying to profit and then having something else happen.
Consider that learning from books, articles and internet research about trading has limitations. They can only take you so far.
Think of it this way. There are lots of books, articles and internet research on driving. They will only get you so far in driving if you never practice driving. Apply what you learn in a paper trading account. It will exponentially boost your trading outcomes.
Wrap-Up
Each of our paths as traders will differ. One trader’s secret sauce can spell disaster for a different trader. Weigh the costs and benefits of the various resources available to you. Use the guidelines above and take your trading to the next level of success.
For more day trading techniques, tools & strategies, check out these articles:
- Day Trading In International Stock Markets
- Options Trading Characteristics To Know
- 3 Forex Trading Methods That Work
Focus on these seven methods to learn how to day trade.
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