Basic Day Trading Insights You Need to Know

Day trading is a pretty lucrative investment if you can do it right. For beginners, the knowhow and the nitty-gritty can be a bit challenging and at times overwhelming. Here are some of the most important qualities you should have when you want to be a day trader.

Knowledge and Experience

Those who try to join the markets without having a good grasp of how it works usually lose their money. For beginners, it’s safe to start with learning technical analysis and chart reading.

But of course, those skills will not be very helpful if you lack a more in-depth understanding of the market and the assets in that market.

Always do your due diligence and understand the ins and outs of the assets that you trade.

Sufficient Capital

For day traders, it’s best to use only the risk capital, or the capital that the trader can afford to lose. This doesn’t only protect them from financial losses, but it also helps them put a check on emotions.

Usually, you need a large amount of capital to benefit significantly from intraday price movements. You also need to consider having a margin account, because volatile swings can incur margin calls very quickly.

Strategy

A day trader cannot shoot from the hip. He needs strategy to have an edge over the rest of the market. Among the common strategies that day traders use are swing trading, arbitrage, and trading the news.

The day traders refine these strategies until they reap consistent profits and effectively minimize the losses they incur.

Discipline

As with any endeavor, a good strategy is only as good as the discipline you exert to do it. Many day traders usually lose a lot of money because they fail to make trades that follow their own criteria.

To gain profits, day traders depend on the volatility in the market. Thus, a stock that moves a lot in a single day may be a good pick for a day trader.

Access to Trading Desk

Traders who work for large institutions usually have access to trading desks, which can also be accessed by traders who manage huge amounts of money.

The dealing desk serves as a means for traders to have immediate order executions, which is something a day trader cannot do without when there’s a lot of movement in the market.

Various News Sources

News offers a bulk of the opportunities that the day traders use for their trades. Thus, it is a must to be among the first to know when something big happens.

The usual trading room has access to the Dow Jones Newswire, coverage of the major financial and business news outlet. There is also software that always analyzes news sources for important stories.

Access to Analytical Software

Trading software is quite expensive for day traders, but it is a necessary expense. Those who use technical indicators and perform swing trading usually rely more heavily on software that news.

Such software can be those that do automatic pattern recognition, broker integration, and backtesting strategies.