If you’ve been looking for a way to make money from home, learning day trading and how to day trade is an excellent way to put some of your financial investment skills to work. Day trading is simply the process of buying and selling any number of stocks including options, currencies and futures, all within one day. The goal of day trading is to buy low early in the day and sell high later in the day with stocks almost never being held overnight or while the market is closed.
Day trading has long been available for banks and financial institutions because of their unique access to market data and the exchanges, but since the advent of the Internet, this data has become available to everyone. Now, day trading allows individuals a chance to share in some of the same financial opportunity and success as larger corporations, meaning learning to day trade is something you’ll definitely want to do if you want to get ahead in the market.
How to Day Trade—The Different Trading Styles
For starters, it’s important that you learn a little bit about the basics of day trading, more specifically, how the different styles of trading play into your own personality. For example, if you are the type that wants to micromanage and play lightning fast stocks, scalping is when you hold onto stocks from a few minutes to a few seconds. On the other hand, if you’re buying before you go to work and selling after you return home, long-term swing and position trading (meaning holding the stock throughout the entire day) will be a better option for you.
Regardless of which style you chose, the best thing about day trading is that it is extremely flexible, so no matter what your schedule or ultimate trading goals are, you can customize a system that is just right for you. That might mean combining a few different styles or just sticking with one, such as:
- Trend Trades: Trend trading is simply buying stocks according to the direction of their current price moving, or in other words, buying stocks that are gaining in price and selling stocks that are dipping.
- Counter-Trend Trades: Counter-trend trading is simply trading stocks against the direction of their current price is moving, or in other words, buying stocks that are dipping in price or selling stocks that are gaining.
- Ranging Trades: Alternatively, when the market is moving sideways—that is, going back and forth between two prices—trades made are said to be ranging.
Other styles of day trading will depend on whether you want to be flexible with your strategies or wait until the market presents perfect conditions for your preference, how many times per day you want to trade and the extent of your portfolio.
Which Markets are Best for Learning How to Day Trading?
Next, you’ll want to start taking a look at the markets, becoming accustomed to how they work and what different opportunities they offer. There are four main types of markets that you can trade in: options, futures, currencies and the stock market. These groups are further broken down into subgroups which are dependent on the stock indexes (e.g. the Dow Jones, the DAX, etc.), the current rates of currency exchange (e.g. Yen to Dollar, Dollar to Euro, etc.) and types of commodities (i.e. gold, silver, oil, etc.). The type of market that you trade in is totally dependent on where your interests lie as well as your knowledge base. For example, if you have zero interest in gold and no knowledge about how the gold market runs, don’t invest in gold—simple.
Getting the Right Day Trading Tools
Regardless of which markets you choose to trade in, you’ll need a direct access broker to give you the fastest trade execution at the lowest cost possible. You’ll also need the right tools for day trading. Luckily, that’s fairly simple which is one of the reason day traders have been able to make such a killing in the market. You’ll need:
- A high-speed Internet connection, vital to the fast-paced trades that take place.
- A good broker who provides you with great analysis and a fee structure that is compatible with your trading style and budget
- Access to a few financial newsletters and FAQ pages about the lingo and trading strategies
That’s it! As you can see it isn’t hard to get started day trading—the hard part really comes in learning how to day trade successfully.
Paper Trading—Don’t Jump Right In
In order to help reduce your initial losses (almost everyone loses at the start), you’ll want to do what is commonly referred to as “paper trading.” This means following stocks and keeping a log of when you would have bought and sold, your reasons for buying and selling, your net profits or loss and any other pertinent information to an “imaginary” trade. Think of this as a trial run that will help you ascertain whether or not you are ready for the real thing—time lost not trading is better than money lost trading in this case.
When you are ready to enter the market, start slowly and pick a few stocks based on your preferred trading strategy. Keep consistent with your strategy since bailing on it too early is a very common mistake. You might have just entered the market at the wrong time. If you start off losing, reduce your investments until you start to see a gain. If you aren’t seeing gains, it might be time to rethink your methods, market and trading style.
Remember, just because day trading is done in just a few seconds, minutes or hours doesn’t mean the losses or gains you incur aren’t very real. It’s always a good idea to get as in-depth as possible when it comes to learning how to day trade. For some more advanced tips on day trading that are sure to make you money, click here right now and become the successful day trader you know you can be!