Understanding day trading basics is the first step into this exciting world that can in time completely change your life. If you have ever dreamed of being your own boss and building wealth, then day trading is something that can help you to accomplish these dreams. Just about everyone has heard some story about someone that was a huge overnight success, and it’s stories like these that fuel the dreams of many people who want to become day traders.
Well the bad news is that these stories of overnight success are just that, stories. It’s possible you will hit it out of the park when you first start out, but it’s extremely unlikely. In fact you’ve probably got a better chance at being struck by lightning than becoming an overnight success in the financial world. While you may be a little bit disappointed to learn that you probably aren’t going to strike it rich overnight as a day trader, that wasn’t the intention here.
Instead the intention was to point out that this day trading guide can help you to understand how day trading works, and how you can get started. Many people interested in day trading never even try it because they are intimidated by how difficult it appears. While day trading is far from simple, it’s also not rocket science. Just about anyone can learn how to have success as a day trader, and by learning the right day trading techniques you can as well.
Getting Things Started
If you are interested in learning about day trading basics then you are almost certainly new to this exciting opportunity. Day trading is very complex, but if you under the basic principles of how it works you can slowly build up your knowledge base until you have a thorough understanding of it. It’s not going to happen overnight, but just like any other new career people embark upon you can become an expert at day trading if you put in enough time and effort.
Just don’t fell bad if you don’t pick everything up right away because there is a fairly steep learning curve. Just plan to spend a lot of your free time learning day trading basics and then building upon that so you can become successful in your new career.
What Exactly Is Day Trading?
Day trading is a type of short term investment that involves putting money into stocks, futures, and other types of traded commodities. For this explanation stocks will be used as an example, but it’s important to note that the process involves day trading with stocks is virtually identical to that used when trading other commodities. Traditional investment strategies teach you to put your money into a long term, stable vehicle that will help it to grow over time.
Mutual funds are an example of this. While this process is one of the safest ways to help your money grow, the pay off isn’t that great, and you have to keep your money tied up long term for it work. That’s hardly an ideal solution, and it’s one of the reasons that day trading is becoming so popular. Day trading differs from traditional investments in that it involves buying and selling commodities over the course of a single day.
The idea here is to get in then get out quickly while turning a profit. Day trading often involves investing money in less stable stocks, which is riskier, but it also offers the opportunity for making more profits. Many day traders look for lower cost stocks that they can buy large numbers of. They do this because even a modest gain on a large number of stocks can add up to a significant profit.
Understand That Risk Is A Part Of The Process
A lot of people who get started in day trading are surprised at how complex it is, and are also very disappointed when they end up losing money on their first few trades. To make things as clear as possible you must understand that day trading is inherently risky, and as such it’s not uncommon to lose money on trades. This is especially true when you are new at the process and lack the experience that professional traders have.
Experienced day traders lose money on trades on regular basis, so if you are new to day trading then you can expect to lose money on trades, and more likely than not will lose more frequently than experienced day traders. The key to succeeding is to ensure that the money you earn offsets your losses leaving you with enough profit to make a good living.
Choose A Brokerage Firm
If you want to buy and sell stocks you are going to need a third party to facilitate these trades, and that third party is called a brokerage firm. Unfortunately brokerage firms are in the business of making money, so that means that they won’t be offering their services to you for free. Paying a brokerage firm is simply a cost of doing business when you are a day trader.
Before choosing a brokerage firm make sure you take the time to do a little homework about them and learn as much as possible before making a commitment to any of them. Different brokerage firms charge different rates, so find a reputable firm that offers competitive pricing is in your best interest. Once you have a brokerage firm in place you can take the next step on the path to understanding day trading basics.
Make Sure That You Choose The Right Day Trading Software
The reason that so many people new to day trading struggle with learning day trading techniques is that there is a huge amount of data that you have to be able to sort through and process. That’s why it’s so important that you take advantage of some of the powerful day trading software options that are out there. Day trading software does a lot of the heavy lifting for you by going through the data and making suggestions on what you should or should not put your money into the next day.
It’s not a perfect solution, but it does give you valuable insight that can help you to maximize your gains while minimizing your risks.
Arbitrage Is An Ideal Software Solution For Day Traders Of All Levels
If you are looking for software to give you an edge then look no further than Arbitrage. Their powerful day trading software will enable you to customize it through the use of filters so that it reflects your trading strategy. Arbitrage will compile the massive amount of data and present it to you in reports that are easy to read. These reports will show you which stocks were winners for the day, which were losers, and which ones are primed to see a spike in price the following day.
You can then use this information to guide you as you prepare the following day. Another reason that Arbitrage is a great option is that they cater to day traders of all levels. Their basic plan for people just starting out comes in at the low monthly price of $100. For experienced day traders who want more features their top plan is $1,000 a month. There are also different plans that run the spectrum of price points between the top and bottom levels so you can pick the right plan for you.
Start Out Small
When you decide it’s time to get your feet wet and start out using some of the day trading techniques you have learned make sure to start out small. Set aside some money to use as a day trader, and make sure that the amount of money you have set aside is money you can afford to lose. While you certainly don’t plan to lose the money, you have to realize that this is a possibility.
Then take the money you have set aside for day trading to get the ball rolling. Take a look at the stock picks that Arbitrage has recommended for you, then contact your brokerage company so that you can buy your shares. You should also set price points now on what your low selling point is and what your high selling point is.
Your low selling point is a point where a stock’s price has dropped enough that you should sell before risking further losses. The high selling point is the point you set ahead of time where you decide to sell if a stock reaches that point. It can be tempting to leave your money in a well performing stock for longer, but then you run the risk of the price going back down.
Above all else don’t get in over your head by investing more money than you can afford to lose. It takes a lot of self discipline to be a day trader, and you have to be able to take emotion out of the equation and make intelligent choices. You can’t get too excited when doing well and act recklessly by risking more money than you should.
You also can’t allow a string of losses to frustrate you to the point where you end up trying to recover your losses quickly by engaging in reckless behavior. Hopefully this day trading guide will help you and give you the insight you need to succeed as a day trader.