With the COVID-19 pandemic came a sharp rise in the amount of people who day trade. Why? People were stuck at home, bored, and looking for ways to make money to combat the impending doom of layoffs.
However, day trading is not for the faint of heart. The stock market is constantly fluctuating which makes day trading an unpredictable experience. No one day of day trading is identical to the next.
If you're an aspiring trader looking for some guidance and day trading tips, you're in the right place. This guide breaks down the top ten day trading tips and strategies for 2023. As a disclaimer, these tips are not to be taken as financial advice.
First, it may be helpful to define what exactly day trading is. Day trading is the act of buying and selling stocks, or securities, within one single day. According to United States Securities and Exchange Commission, your goal when day trading is to try to "capitalize on short-term changes in price".
In other words, day traders target volatility. The stock market is constantly going up and down, which affects stock prices. When day trades think a stock price is going to increase soon, they'll buy it and sell it for capital appreciation.
Or, on the other hand, if a day trader thinks a stock is going to decrease or go down soon, they can make money by shorting it. These fluctuations in stocks is precisely how day traders make money.
In order to day trade successfully, you need to have a solid understanding of the markets and products. You also need to be prepared to take risks, which day trading involves a lot of.
People day trade for a variety of reasons beyond just making a quick buck. It's easy to do from home, you can control your own schedule, and all you need to get started is a computer and a secure Internet connection.
You also don't need formal training and there's a plethora of information and tutorials available on the market, how to trade, and more. Also, as a day trader, you must close your positions by the end of the business day.
That means capital doesn't get trapped with one stock and you can benefit monetarily from falling stocks by quickly selling your assets.
Are you ready to start day trading? Whether you're brand new to this practice or are a seasoned veteran, below are the ten best day trading tips that can help guide you to success.
The first and probably most important day trading tip is to have patience—not only with the markets themselves, but with the actual practice of day trading itself. Day trading requires a lot of time and attention, and usually requires you to dedicate most of your day.
If you only have limited time or are pursuing day trading merely as a side hustle, you're unlikely to succeed. To be a successful day trader, you need to have patience and dedicate ample time to the practice.
Another thing you'll want to prioritize when you first start out in day trading is securing the right platform. There are many platforms you can day trade from, but some cost more than others to get started.
When you're first starting out especially, you likely don't have a lot of capital to begin with and you won't want to waste it on expensive fees. Find a platform with lower fees that helps you day trade for an affordable price.
Successful day traders are experts not only in the market, but in performing technical analyses. A technical analysis is your way of examining the market and determining your day trading strategy.
Price action trading is most important here. You'll want to purchase at support levels and get rid of during resistance levels. And because day trading happens quickly, usually without much time to think, you'll want to make sure you feel confident about your technical analysis so you don't waste time.
The longer you wait, the less likely you are to make profit. Therefore, you need to be knowledgable and confident in your trades, hence why it's crucial to perform a comprehensive technical analysis.
Day trading is all about taking risks. If you don't want to take risks, there's no point in getting started. Higher risk equals higher potential profit, but you won't want to start out taking big risks right away.
Be sure to weigh the potential pros and cons of a risk before making the jump—small risks such as 1% risk per trade is a realistic amount. This level of risk can bring you higher rewards without leaving you completely vulnerable.
By becoming a master of risk management, you can set yourself up for serious success as a day trader.
Knowing the markets refers to knowing how to read day trading signals. What's the behavior of the markets? What's the difference between stocks, crypto, and futures?
These are the kinds of questions you should know the answers to before day trading. Limited knowledge or understanding of these topics can lead to major losses. In addition to these topics, you should know the best hours for trading and basic trading psychology.
If you want to start making consistent profits as a day trader, you'll need to day trade consistently. While it seems like a pretty obvious tip, many traders will find that after making a quick buck, they'd like to take some time off from trading. This is a bad idea because it can get you out of the practice of trading.
However, that's not to say you need to trade every single day. Rather, be consistent in the way you trade, how much risk you take on, and your mindset when trading. Simply put, if you want to get results, consistency is key.
This tip applies more to aspiring day traders who may not have much knowledge on their day trading strategy or the different kinds of markets. Before you jump in, it's a good idea to spend the time learning about the markets and ins and outs of day trading.
Many day traders are people who come from an investment career because they've accrued plenty of knowledge on the markets. But for those who wish to day trade and don't come from an investment background, it's a good idea to immerse yourself in online courses, watch tutorials, and educate yourself on other people's experiences day trading.
A general rule of thumb you'll want to stick to is to never trade with borrowed money. Until you get more confident in your day trading strategy, you'll want to start out small and keep you risk relatively low.
Every day won't be a winning day so there will be days and times when you lose. Start out small and grow your trading account in small increments. Make sure you're trading with whatever money you actually have and are okay with losing.
When you're day trading, it's important to not be too reactive to the market's volatility. Your emotions will overpower logic nine times out of ten so it's important to maintain a clear, objective mindset when trading.
When a trade doesn't go your way or you experience a loss, it can be all too easy to lose your cool, but try not to. This day trading tip also comes back consistency. Because the market is so volatile, you can't let it affect your emotions or else you'll be all over the place.
If you get too emotional about a stock, you may start convincing yourself it has no risk. Stay consistent in your objective, clear-headed mindset and you can protect yourself from unnecessary risk.
Hopefully, these investment tips helped give you a good idea of where to get started with day trading. While these day trading tips aren't meant to be taken as financial advice, they may be helpful for beginners who are just starting out in day trading.
If you're looking for more tips or consulting on day trading, contact Gold Signals today. They specialize trading in the forex market, and have a proven track record of getting customers results.
If you're new to day trading or want to boost your earnings, learn the top day trading tips and strategies for 2023 right here.