Most of the time, day trading strategies target stocks, forex trades, and futures, and they can be a great way to generate quick return on investment from your portfolio. However, as valuable as day trading is to some, it’s also a controversial concept to others. Some traditionally-minded stock traders believe that the short-term nature of day trading makes it more like gambling than investing. However, you might feel about the strategy, it’s important to learn how to day trade before you jump in with your cash.
Conduct a Self-Assessment
The first step in any successful trading strategy involves thinking carefully about your goals, attributes, and personality type. The modern marketplace is always transforming, and many investors believe that a period of introspection before you enter any strategy can help you to prepare for the challenges that might arise. Ask yourself:
- What kind of personality do you have? Are you more of a risk taker, or do you like to be careful with your money?
- What are your goals? What do you hope to accomplish in the day trading markets? Be realistic here, particularly if you’re just getting started.
- Attributes: Are good with numbers, technology, or do you have a certain way of understanding the market? Think carefully about how these attributes could help you.
Access the Resources You Need
In recent decades, more day traders than ever before have begun to enter the market, driven by the accessibility of online trading forums. The digital world has lowered many of the standard barriers to entry in trading, which means that you only need a handful of resources to get started. Here are some of the things you’ll need:
- A piece of hardware connected to the internet – this might be a smartphone, desktop, tablet or laptop.
- Market connectivity: Make sure that you have a reliable internet connection to ensure that you don’t miss out on great opportunities as a result of “lag.”
- Software trading platform: A software trading platform is your portal into the trading universe, choose the one that you use wisely.
Develop a Plan
Finally, just as with any other trading strategy, it’s important not to enter the market until you have a robust plan of action. In day trading, you’ll need to make decisions quickly, and your plan will help you to do this without regret by reminding you of your market entry and exit rules, among other things.
Make sure that your day trading plan includes:
- Rules for when you’ll be willing to get involved with a future, forex or stock, and rules for when you’ll need to sell or trade that asset.
- Position management: Great day trading plans generally come with things like profit targets and stop losses to help you manage your positions carefully on a day-to-day basis.
- Risk management: Ensure that you know how to manage your risks by knowing when you need to get out of a dangerous situation, and when you simply need to be patient with your purchases.