Things You'll Need:
- Trading platform with real time quotes and charts
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Step 1
Pick a proven strategy and stick to it. There are many successful day trading strategies and it would be a monumental task to learn them all and then deploy them. Fortunately, it isn't necessary to learn any more than one trading strategy. But it is important to know everything about your chosen strategy before committing large amounts of capital to it.
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Step 2
Learn technical analysis. Technical analysis is far more effective in day trading than fundamental analysis. Tracking spikes in volume and the convergence or divergence of moving averages has much more to do with the predictability of a price swing than a random press release does. Know your charts.
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Step 3
Never hold a position overnight. The strategy is called day trading for a reason. Whether the position is up or down, it must be closed out before the end of the trading day. Too much can happen overnight to effect the price of a stock. Closing all positions within the same trading session is part of the discipline of the day trader.
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Step 4
Always use stop limit orders. No trader and no trading system is perfect. Markets will move unexpectedly against even the most seasoned day traders. Stop limit orders help to limit the losses a trader takes on a trade by triggering a sell order if the trade drops by a predetermined percentage or dollar amount.
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Step 5
Know your exit point before you enter the trade. Just like stop limit orders are important to the downside, knowing where to get out of the trade at a profit is critical to long term success in day trading. Greed is almost as dangerous as stupidity. Holding a profitable position too long is inviting the market to turn to the downside. Most day traders will stay in a trade as long as the accelerated trading volume remains. Once the volume drops, it is almost always time to exit the trade.
