How to day trade
Table of Contents
What is day trading?
Not to bore you with technical jargons, day trading refers to a trading system where the trader opens and closes all positions (or trades) on the same day.
With the day trading system, you get to leverage little movements in the market and make decent wins during every trading session. Even though day trading is common in virtually every market, it is more pronounced practiced in the forex markets.
To succeed as a day trader, it’s best to equip yourself with ample knowledge of the market. You should have it at the back of your mind that risk fluctuates with sharp price movements.
On the bright side, day trading saves you the commissions and fees of holding positions overnight — swaps. Also, day trading protects you from price slippage or large price movements that happen overnight; especially when the market is closed and you have no control over your trades.
The idea is to open multiple trades and take small profits over a short period. Interestingly, day trading accounts for a significant part of trade volume and market liquidity.
Having discussed day trading. Let’s shift our focus to how to day trade.
How to day trade
You have probably been wondering what intraday trading means and why are we discussing it now? Intraday trading and day trading are the same thing — it is a tomayto-tomahto and potayto-potahto thing.
To get started on day trading, you need the right tools in your arsenal. And first on your list is a reliable and effective trading platform.
You need a trading platform that offers extensive trading capabilities such as a fully customizable trading platform that suits your taste and advanced charting features. Of course, it has to be automated as well.
While you are at it, here are invaluable tips about day trading you should always have at the back of your mind.
Day trading tips you should know
1. Day trading won’t make you rich overnight. Focus on building your Wealth over time.
Though there are opportunities and testimonies of day traders making millions overnight, such opportunities come don’t come by every day. It takes time to build wealth as a trader. Mind you, forex trading is not gambling and you can’t rely on luck to be a successful trader.
Invest in proper trading education
One way of developing the right trading mindset is to steer clear online videos, books and seminars that portray day trading as a get-rich-quick scheme. Invest your time and resources in proper trading education.
2. Don’t attempt to outsmart the market
Like virtually every other fling in life, there are tons of factors that affect the outcome of trades in the forex market. The least you can do is follow the market and never attempt to outsmart it.
In forex, it’s not unusual for the strategies to fail — even the best strategies will fail at some point in time. Keep an open mind and follow the market where it leads.
Experts and experienced traders always advise that traders keep their emotions in check and be flexible in their thoughts. You should keep abreast of recent news, master as many indicators as you can, spot the trend and follow it.
3. Simple is best
As an old-timer or prospective day trader, the last thing you want to do is make trading complicated for yourself. Having spotted a trading opportunity, the next thing you should have in mind is planning your trade.
Remember, there are no such things as luck or magic in trading. All you need is a strategy — a strategy to help you plan your entry or exit.
Master your strategy and stick to it
As the famous saying goes, what you need is one athlete to jump 10 feet and not 10 athletes to jump one foot. Hold that thought and bring it to our discussion.
What that means is that it’s better to master one strategy than chasing different complex strategies. The idea is to keep things simple and be consistent. When things don’t go your way, stick to your strategy and back test regularly.
Other day trading tips you should keep in mind include discipline, be realistic, and make the most of trading tools — they are your friends.
What are the best times for day trading?
One question that is common among beginner day traders is what time is best for trading. Because day trading is dependent on the volatility of the market and volatility differs during different sessions, it helps to have a plan to help you spot the right time to trade.
Here are some tips to get you on the way.
Mondays are generally quiet and because price movements over a short period are is an essential aspect of day trading, you need to keep eye on the times where there are high volatility and liquidity in the market.
Then, aim to catch the beginning of the London session. It favors short term trading (day trading) and it is popular for high activities. Trading on public holidays carries significant risk. Avoid radinf on public holidays. Then trading late hours on Fridays is a No! No!
From experience, you should also sit out trades that have already moved 20 to 30 pips. The range at the early hours of the day is likely going to be the limit for price action for the rest of the day.
Last but not least, it’s best to sit on your hands than open or take trades that don’t fit in your trading strategy.
We are rounding off
Hopefully, all we have shared with you have given you insight on how to day trade and insider tips to protect your capital. Remember to adopt the best risk management and stick to your day trading strategy. All of this can be achieved by studying the market and learning from the right Education. Day trading without the proper education and practice will hinder you from becoming a profitable trader. It takes time, dedication and remember to be realistic with your expectations.
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