Day Trading at Low Levels with High Returns
A cursory review of many investment sites and contracts will reveal the standard disclaimer that all investment is at risk. Investors and day traders strive to make choices with the most beneficial combination of potential gains while balancing that goal against risk factors. This is why it behooves day traders and long-term investors to perform their own due diligence when selecting investment vehicles that will achieve their investment goals.
One popular misconception however is that it takes big money to make big money. Placing a larger-than-necessary risk on financial capital exposes day traders to significant loss that may have been avoidable. Even if you believe strongly that a particular stock is in a position to generate considerable gains against your investment and indicators are just where your strategy wants them to be, it is wise to exercise restraint in placing a high percentage of your account on one individual buy order. Even day traders with a proven track record and profound analytical skills can pick a loser now and then. It would be much less traumatic to lose 25% of your capital than 50% or 100%.
By limiting your investment to a smaller percentage of your available capital you limit your potential for loss, and by combining your buy with a stop loss point you further control potential financial damage. If your buy is able to realize the potential you expect you’re still rewarded with a respectable percentage of profits.
High Returns from Day Trading
Many day traders –notably beginners – take the plunge when they discover that “can’t miss” stock or other investment that inspires them to go “all in” with their capital. This is exactly why many day traders have a short career with investing. Either the capital is gone, or confidence disappears along with their positive account balance. That is obviously not where you want to be. Longevity in day trading is the objective.
Through investing smaller amounts to achieve gains you can profit more than day traders who have higher losses and gains over time. Learn to calculate the risk/reward ratio of every trade to determine if the buy makes sense to your strategy. There is a wealth of information available to guide day traders in that evaluation. This can equate to better than average gains for the disciplined and educated day trader.
Another consideration for your buys is setting the stop loss and target sell price at realistic values. Stop loss will avoid tragedy to your capital and the sell price needs to be at some reasonable amount. Don’t make your sell price something that is a wish for untold riches – you want an amount that is achievable in a short timeframe to benefit quickly from your trade. Take the gains and move on to your next buy.
Accomplishing Both when Day Trading
Day trading combines research with analytical skills and sometimes just plain “gut feel”. It’s important to weigh risk vs. potential for gain when making trades and to place limits on your buy/sell orders to eliminate career-limiting impact on your finances. Consistency is what day traders need to stay in the game. Buying at low values with a track record of gains will keep you there.
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Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.