5 Useful Tips for Would-be Day Traders
Day trading can be an extremely rewarding field – or, on the flip side, financially devastating. When done properly and with sufficient capital, trading can yield significant returns that can help flesh out a future retirement account or pay next month’s bills.
There’s plenty of room for error however, so proceed into the world of day trading with caution. It is usually a good idea to study with an experienced friend or take a course – like those offered through Online Trading Academy – to brush up on your understanding of the markets. Once you feel like you have a grasp on the industry and feel ready for real world situations, follow these five tips to ensure you come out ahead.
Make a Plan
Make sure you create a long-term plan and short-term schedules to avoid financial ruin. Thought it may sound melodramatic to phrase it that way, the consequences of unfocused or ill-planned investing can be severe. A long term plan gives you the structure you need to approach each week of decisions wisely. A daily schedule keeps you on track for when to buy, when to sell and when to take much needed breaks.
Stick with the System
Once you figure out what works for you, don’t deviate from that approach. One popular way to minimize losses: Take advantage of stop-loss orders, which trigger a sale if a stock hits the predetermined loss threshold. While this doesn’t guarantee you won’t lose money on a stock trade, it can prevent losses from becoming overwhelming.
Buy Low, Sell High
This might sound like a clichéd mantra for investors, but it’s a cliché for a reason – it’s good advice! Take advantage of analytical software and any professional trading programs you can get your hands on. Anything that can give you an edge and help you monitor the trends as closely as possible. When it comes to buying low and selling high – it’s not all that hard to get in on the ground floor, the trick is knowing when to exit.
Make Good Life Choices
A good trader takes care of his body and his mind. The emotional stress that can accompany the fast-paced, frenetic world of trading is taxing to the individual. It’s a good idea to get plenty of sleep, exercise regularly and eat well to ensure that your mind stays sharp. Decisions are often made in the blink of an eye. If you’re feeling sluggish and overtired, it can mean the difference between profits or losses that day.
Manage Your Earnings
Almost anyone can make money day trading – the key is to minimize losses. Once you start to accumulate wealth, manage your earnings wisely. It is a common beginners mistake to take any and all profits and immediately put that back into the trading pool. While it can be effective to invest with more capital, don’t forget to set money aside as savings. If you are turning a profit, good for you. You’re one of the rare 10% of day traders who can make such claims. The key to minimizing losses is smart management of that income.
Day trading is no easy endeavor but when executed properly, it can lead to considerable gains. Be smart about financial decisions and follow the above tips as best as possible to avoid common beginner’s mistakes.