Becoming a profitable day trader is not easy. It takes time, patience, and a lot of hard work. But it can be done.
Here are 5 tips to help you get started on the right track!
1. Create A Trading Strategy
The first and arguably the most important step to becoming a profitable day trader is to create a trading strategy.
This should be a rules-based system that you can follow without fail. Your strategy should take into account important things like your risk tolerance, capital requirements, and investment goals.
Once you’ve developed a solid trading plan, stick to it! And don’t forget to regularly keep updating and revising it as relevant market conditions change.
2. Put Your Strategy To The Test
Once you have created your strategy, it is important to test it out before putting any real money on the line.
The best way to do this is with a simulated or “demo” trading account. This will allow you to practice your strategy and get a feel for how it works without putting any of your capital at risk.
This step is absolutely crucial, especially for beginner traders, as studies have shown that up to 97% of inexperienced day traders lose most of their capital in their first 300 days of trading!
3. Always Start Small
When you are first starting out, it is important to trade small amounts of money. This will help you to limit your losses and give you time to learn the ropes.
As you become more experienced, you can gradually increase the amount of money you trade.
However, make sure to only risk what you can afford to lose!
Because if you’re risking money that is vital to your current lifestyle, you probably won’t be able to make the kind of logical and calculating decisions that profitable day trading depends on.
4. Manage Your Risk And Use A Stop-loss Every Time
One of the most important aspects of day trading is managing your risk. This means only risking a small portion of your capital on each trade.
It also means having stop-loss orders in place to protect your capital. The market is always full of unexpected and sudden changes, and even the most intelligent trade might go bad when the market throws you a curveball that you had no way of anticipating.
This is why most smart traders always use a stop loss order. These orders ensure that each trade has a fixed exit point that will activate once a trade goes south quickly.
Setting the ideal stop loss order that protects your capital without closing profitable trades too early is a difficult skill to perfect, however, it’s one that every great trader needs to master early on in their trading career.
5. Have Patience And Be Disciplined
Finally, it is important to have patience and discipline when day trading. Rome was not built in a day and neither are profitable trading careers.
It takes time to learn the ropes and develop your strategy. Stick with it and don’t give up and you will eventually be successful.