How to Practice Day Trading

Most stock market investors invest for periods of years, even decades. The market has proven to be a good money-maker for people who are willing to hold their portfolios long term. However, there are a growing number of traders who buy and sell stocks within the same day, hoping to capitalize on small fluctuations in price. These short-term traders are known as day traders.

Instructions

Difficulty: Moderate

Things You’ll Need:

• $25,000 margin
• Active trader software
• Fast Internet connection
• Multiple computer monitors (optional)

1. Set up a margin account with one of the many online brokers who work with active traders before you begin to practice day trading. You can't practice the art of day trading without this account.
2. Put at least $25,000 into your margin account and maintain this balance at all times. This equity balance can consist of both stocks and cash. This is your collateral in case you buy short and can't pay for the difference in price if the price rises instead of drops. The value of your margin account is calculated as of the end of the previous business day.
3. Study the various day trading strategies and decide which one works best for you. Some common methods for day trading include "Square of Nine" trading, which uses mathematical models and geometric patterns to predict patterns in the market; "swing trading," in which you simply hold onto a stock until you notice slight fluctuations; as well as many, many other methods.
4. Prepare to spend a lot of time in front of your computer. If you are willing to follow breaking news, you can try to make money by beating other traders to the market and leveraging the "hype" that the news generated.
5. Take a coffee break or go for a walk around the block from time to time. Modern trading software allows you to input your trading criteria to stop orders, allowing you to go out and do your thing. Stop orders automatically buy or sell a stock when it hits your preordained price.
6. Practice with various methods until you find one you believe in and can be disciplined with.

Tips & Warnings

• It is estimated that more than three-quarters of all day traders lose more money than they started out with, and this figure includes professionals who have been in the business for years.