When it comes to investing, the majority of people assume that you put your money in a certain stock or commodity and wait for its value to rise. This is the so-called position trading and it’s the exact opposite of day trading. Essentially, day trading means buying and selling a certain asset within the same day (before the market closes for the day).

This oversimplified explanation already indicates that it’s something dynamic and risky (at least riskier than position trading). As such, it’s more volatile and while the risks are greater, so are the rewards.

Now, day trading is a relatively new concept, seeing as how it required the technology that would make it possible. Without present-day devices, internet connection strength, and trading platforms, it would be completely impossible to get engaged in this. Even without these strictly technical issues, it would be impossible for one to choose the platform (which they can now do via reviews) and get educated on the subject matter.
With that in mind and without further ado, here are a couple of day trading tips to help you get started as soon as possible. Experience is always the key, so, the sooner you get started, the better.

Bare Necessities

First, you need to start with the list of necessities in order to get started. From the technical standpoint, you need a device (a computer and a mobile device) with an internet connection, as well as a trading platform. Second, you need some initial capital. With these two things alone, you can start day trading.

Keep in mind that if you’re serious about this, you need to set some professional standards. For instance, while any device with an internet connection will do, you need to acknowledge that responsiveness makes a world of difference in professional trading. This is why both the connection and the device need to be up to date.
While you could, technically, trade from any platform that you choose, picking a platform best suited for your own type of trading (TD Ameritrade, Robinhood, E*TRADE, Interactive brokers, etc.) is important. So, spend some time doing the research, potentially even researching whether there’s a trial version so that you can check out the platform yourself.

Lastly, make sure that you start out with enough money. Sure, you can start trading forex for as little as $500 and futures for as little as $1,000, however, you do not want to get started with the bare minimum.

Learning Checklist

When starting out, you’ll have so many questions. Now, while it’s obvious that you need to start with the terminology, this is too basic to even include in the list. Amongst some of the other frequently-asked questions there are those like:

  • How do these trades actually work?
  • When is the time to buy and sell?
  • Are there any day trading strategies out there and what are they?
  • How to read and recognize trading chart patterns?
  • What methods are out there to help you limit your losses?

It is worth looking up each of these questions independently but you also need to accept that some of these answers will come to you in time. Access to online courses and learning materials means that you can cram some of this knowledge. This means that three-to-six months of preparation may help make the knowledge gained through experience more usable. In other words, you need both technical understanding and experience.

How Much Can You Earn?

The reason why we singled out this question is because it’s commonly asked while being nearly impossible to answer. First of all, it depends on how much you’re investing. Second, it depends on your own experience. You can’t expect to make the same amount in your first month in day trading as you will months (and years) later.

Then, there’s the question of personal restraint and self-discipline. The key thing here is your actual ability to limit your losses. Some traders do so via automated stop orders and day trading strategies.

The simplest (yet the most accurate) answer is that you can both become a millionaire by day trading and you can go broke.

Setting stop orders
The main way to limit your losses is to set some stop orders. What does this mean? It means you can set an automatic order to stop trading every time you lose 1-2% of your total net value (stop loss) and set it to stop trading whenever you gain 6-7% of total value (stop gain). With these numbers, you can remain profitable even in a scenario where you are successful in just 25% of all your trades. By setting the bar so low, you’re drastically increasing the odds of actually making money.

Day trading strategies
Sticking to a strategy won’t guarantee profit. Still, they can help provide a bit more consistency. This is especially true during your first several months of doing business. There are numerous such strategies out there and it all comes down to what sounds right to you. For instance:

  • 531 Rule: According to this strategy, when trading in forex, you should only trade five currency pairs, using three trading strategies, and trading at the same time of the day. While this may sound a bit oversimplified, there’s a method to this madness. First of all, limiting the number of currencies actually increases the chance that you’ll get familiar with them. Limiting the number of trading strategies ensures that you’ll develop an understanding of them. Lastly, trading at the same time of the day will help you recognize recurring patterns. In a way, it’s an ideal strategy for beginners.

  • 375 Rule: This rule is a bit harder to understand but it’s fairly simple in nature. You count how many days, hours, or bars a run-up or a sell-off has transpired. Then, on the seventh, fifth, or the third day, you look for a bounce in the opposite direction. You should try this a couple of times (with a minor investment) and be awed by how often it actually works. Of course, it doesn’t always work, which is why it’s often compared to the rule of thumb, rather than an actual rule.

One of the key points of using a strategy is to prevent yourself from changing your own game too often. Without some kind of a system, you always risk approaching day trading as if it were a gamble. Spoiler alert, it never ends well.

Wrap Up

In the end, there are a couple of warnings that we just have to issue in order to stay on the safe side.

  • First, everyone’s experience is different and since there’s no recipe for success, it’s always best to be extra careful. Never invest more than you can spare to lose. The risk factor is always present, especially in a market that’s as volatile as day-trading.

  • Second, be serious about this if you’re serious about making a career out of it. Even if you see this merely as a potential side income, you need to step up your game from a casual approach.

  • Third, remember that this is a business, so make sure that you make business decisions. In other words, never invest in an emotion. While trusting your intuition sounds like something that successful people do, more often than not, it will lead you astray (due to positive bias).

Once you get these few things out of the way, and with the above-listed factors taken into consideration, your chances of making it as a day trader will be considerable.