Free Basics on How to Day Trade
Day trading is a trading strategy where traders place trades in the stock market and close all their trades before the day ends. The trader's goal is to make profit off the moves in the market during the course of the trading day. While day trading gives traders the opportunity to gain sizable profits over the course of the day, there is also the potential to suffer great losses as well. Day trading is not for the novice trader, but rather for traders who already have a good understanding of the market.
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Things You'll Need
- Brokerage or broker
- $25,000 of capital
- Access to financial news
- Trading platform with advanced trading tools
Instructions
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Day Trading Basics
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Learn the basics of the stock market and day trading. Before placing the first trade, traders need to know the mechanics of day trading and the nature of the market.
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Find a broker or a brokerage. In order to trade stocks on the stock exchange, a trader must work through a stock broker or brokerage. Online brokerages that specialize in accommodating day traders include Remote Day Trader and NobleTrading, to name just a couple.
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Research stocks to trade using advanced trading tools and business feeds to determine good prospects to trade. Some brokerages have trading platforms that give traders access to advanced trading tools, such as charts, stock screening tools, live streaming quotes and other similar services to help in picking trades.
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Deposit money with the broker or brokerage. In order to be a pattern day trader, investors must carry a minimum of $25,000 in their account.
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Place a trade. This is a step that investors really need to put a lot of thought into. A carelessly placed trade can cost a lot of money. Day traders look for stocks that have a lot of liquidity, which means that the stock is traded heavily through the day. Heavily traded stocks give day traders an opportunity to make multiple profits off on one stock. Larry Schade, who writes for TradeLikeThePros.com, recommends the S&P 500 index stocks for day trading.
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Use trading platform and trading strategy to manage trades. Traders manage their trades by placing special orders such as stop-orders, stop-loss orders and limit orders. These types of orders automatically trade the stock when it reaches a certain price.
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Exit the trade while sticking to your trade strategy. Upon placing the trade, a day trader must find a place to exit the trade for either a profit or a loss. While different strategies recommend different percentages of how much loss to take or at what point to take a profit, the important thing is to stick with whatever strategy one is using and enter and not exit trades based on emotion.
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Tips & Warnings
In all of stock trading it is important to have a trading strategy. This is especially true in day trading. Day traders need to have an entry and exit strategy for entering trades, for profit taking and loss management as well. Additionally, a day trader needs to have a strategy to mange daily profits or losses.
It is important that day traders never trade more money than they can afford to lose. In other words, a trader should not put all of their assets into a day trading account.
Day traders should never borrow money to fund their trading account.
References
- soyouwanna: Day Trading Basics
- daytrading: An Introduction to Day Trading
- nobletrading: Online Day Trading Stocks & Futures Commodities Day Trading
- remotedaytrader: Online Proprietary Stock Day Trading with Professional Leverage
- dowtrend: Stock Trading, Day Trading Stocks & Options
- tdameritrade: Online Trading and Investing Tools-TD Ameritrade
Resources
- Photo Credit Success & Wealth image by wayne ruston from Fotolia.com
