Rules for Beginning Day Traders

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Like any activity worth undertaking day trading requires some thought and knowledge before just exposing your finances to unnecessary risk. Day trading is well-publicized as a risky venture but with an understanding of the basics and rules day traders can realize gains while minimizing loss potential. Adhering to these guidelines will help ensure your success as a beginning day trader:

1 – Spend some time and effort getting educated

Day trading can include a broad array of investment types and order types. Trades can include stocks, exchange-traded funds (EFTs), commodities, currencies, and more. Put some thought into the types of accounts you intend to include in your trades. You will likely be more comfortable investing in some categories more than others (stocks as opposed to foreign currencies, as an example).

Next consider the types of orders that would most apply to your investment strategy. Day traders can establish cash accounts for trading, or you may prefer to trade on margin, which basically amounts to taking a loan from your online broker. Become familiar with terms and their meanings such as stop-loss orders, which can be used to limit your losses on a particular investment if it gets below the value that you indicate on the order.

Read at least a book or two on day trading to get truly informed on what experienced day traders consider sensible approaches for beginners. There is no better teacher than experience.

2 – Select the online broker that meets your needs

This is an important consideration. If you intend to trade in global markets or after-hours trades you must deal with a broker who can offer such capabilities. Other considerations include the level of service and support you need, since some will only have support access via email of FAQ functions. As a beginner you probably will require more significant support options.

Tools provided by the online broker are critical to your success. Charting options can vary greatly among brokers and you will want to learn how to utilize at least some basic investment charts (here’s where the education rule is important) to follow investment activities and detect volatility or shifts in your trades.

Performance is critical for day traders as well. Trades are often bought and sold in minutes or hours, based on activity and alerts that impact your investments. Timing can have a significant impact on the profit or loss generated by your trades. You need an online broker who can execute your orders quickly and accurately.

3 – Limit investment in an individual asset

Many day traders establish a maximum percentage of their capital that they venture on any given trade. This limit may be as low as 2% of your account balance as a hedge that prevents huge loss potential should the trade not provide the returns you anticipated. Set that limit and live by it.

4 – Keep records

This is a must. As a beginner your trade strategy will just be starting to formulate and will continue to evolve based on your experience with what trades were profitable and those that resulted in losses. Keeping records of why you made trades and what worked for you vs. what did not will help you develop that strategy into a profitable day trading formula.

5 – Learn how to spot the right trades for you

Some of the key qualities to look for in stock trades are:

  • Volatility (movements in a particular stock – up or down)
  • Volume – how many shares are being actively traded?
  • Trending – are there indicators of rising or dropping prices?

6 – Keep an eye on news events

It’s a fact that news impacts the stock market – and often very quickly. You can use current news events to your advantage when you know how to recognize those that may impact particular markets and buy or sell accordingly. Even events such as harsh weather conditions can impact stock prices. While a severe winter may lower retail expectations due to consumers not getting out to shop, commodities such as heating oil or coal may be impacted in the opposite way with an increase.

7 – Don’t let emotions rule your trades

Day trading and emotions just don’t go well together. Having a ‘gut feel’ that a stock or commodity is going to reap huge benefits or getting a tip from a friend or relative about a once in a lifetime opportunity can empty your account in minutes. Stick with your strategic limit on a percentage that can be allocated to a single trade, and you’ll be protected from what could be your biggest mistake.

There will be More Rules for Beginning Day Traders

As you consider day trading acquire at least some basic knowledge of day trading techniques and terminology. There are many new terms, charts, and philosophies tied to day trading. Select an online broker who also supports the trading platform that meets all your needs (desktop computer, laptop, tablet, smartphone, or a combination of multiple technologies).

SureTrader is a leading online broker with the tools you need to stay up-to-date on news that impacts your buy and sell decisions. SureTrader provides friendly and courteous support available to our clients on a 24×7 basis to answer any questions and resolve problems.

SureTrader’s desktop and mobile applications ensure timely and flexible access to SureTrader services – iOS and Android platforms are each supported. Global access to services enables quick and easy trades even in after-hours trading.

Contact SureTrader right away to get started doing online trading with the best in online brokers.

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

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