Day Trading Tips – The Best 5 Profitable And Winning Tips Ever

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Contents

The Best 5 Profitable And Winning Day Trading Tips Ever

As short-term traders, you need to pick the best day trading tips to obtain profits from the financial market. Traders are more active in day trading market to make a good amount of money. However, the long-term success rate is too low for day traders.

Basically, day trading is a trading style. Traders buy and sell financial instruments within the same day. But, you can perform trading multiple times.

In this article, you will get a collection of day trading tips to make profitable and winning trade. Moreover, these trading principles will help you to improve your trading skill.

So, read the blog to find out whether you are ready to trade day-trading or not.

Is It Possible To Make Money From Day Trading

For day-trading, options market could be a good example. Traders can use various short-term trading methods and strategies to make money.

Unfortunately, many people lose money while day-trading because they have a lack of basic trading knowledge.

It can be the worst trading method if you can’t take good advantage of it. So, it is wise to select a good broker platform to start your day-trading. Because scammers will try to dupe you by making false promises.

The significant advantage of a day trading is that you do not need to invest a lot of money to perform trading. You truly become a master of day-trading strategies that can deliver good profits.

The Best 5 Profitable And Winning Tips

You will find many traders who are successful in short-term trading business and maintain long-term success.

As a trader, it is obvious to have a proper plan and strategy to make each trade profitable. Remember trading is not the primary source of income while you are new in this field.

According to the popular options trading platform IQ Option , here are the best 5 tips that help you to make a unique trading style:

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Knowing the financial market is not required when it comes to general trading procedures. However, you have to understand the event types and importance. Because important news and events have a great impact on market movement.

The price of currencies and stock markets fluctuates in the time of news related events. So, before you start trading, try to follow the market in your spare time.

Remember that fundamental factors can still affect the outcome of your deals whether its a short-term trading or not.

It is also important to pick the right trading time to open your deals. Moreover, it is up to you to find the time that best suits your trading style and develop your trading strategies accordingly.

10 Day Trading Strategies for Beginners

Basic Day Trading Tips

Day trading is the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game—if it is played correctly. But it can be a dangerous game for newbies or anyone who doesn’t adhere to a well-thought-out strategy. What’s more, not all brokers are suited for the high volume of trades made by day traders. Some brokers, however, are designed with the day trader in mind. You can check out our list of the best brokers for day trading to see which brokers best accommodate those who would like to day trade.

Online brokers on our list, including Tradestation, TD Ameritrade, and Interactive Brokers, have professional or advanced versions of their platforms that feature real-time streaming quotes, advanced charting tools, and the ability to enter and modify complex orders in quick succession.

Let’s take a look at some general day trading principles and then move on to deciding when to buy and sell, common day trading strategies, basic charts and patterns, and how to limit losses.

Key Takeaways

  • Day trading is only profitable when traders take it seriously and do their research.
  • Day trading is a job, not a hobby or passing fad of a pastime. Treat it as such—be diligent, focused, objective, and detach emotions.
  • Here we provide some basic tips and know-how to become a successful day trader.

Day Trading Strategies

1. Knowledge Is Power

In addition to knowledge of basic trading procedures, day traders need to keep up on the latest stock market news and events that affect stocks—the Fed’s interest rate plans, the economic outlook, etc. So do your homework. Make a wish list of stocks you’d like to trade and keep yourself informed about the selected companies and general markets. Scan business news and visit reliable financial websites.

2. Set Aside Funds

Assess how much capital you’re willing to risk on each trade. Many successful day traders risk less than 1% to 2% of their account per trade. If you have a $40,000 trading account and are willing to risk 0.5% of your capital on each trade, your maximum loss per trade is $200 (0.005 x $40,000). Set aside a surplus amount of funds you can trade with and you’re prepared to lose. Remember, it may or may not happen.

3. Set Aside Time, Too

Day trading requires your time. That’s why it’s called day trading. You’ll need to give up most of your day, in fact. Don’t consider it if you have limited time to spare. The process requires a trader to track the markets and spot opportunities, which can arise at any time during trading hours. Moving quickly is key.

4. Start Small

As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding opportunities is easier with just a few stocks.

Recently, it has become increasingly common to be able to trade fractional shares, so you can specify specific, smaller dollar amounts you wish to invest. That means if Apple shares are trading at $250 and you only want to buy $50 worth, many brokers will now let you purchase one-fifth of a share.

5. Avoid Penny Stocks

You’re probably looking for deals and low prices, but stay away from penny stocks. These stocks are often illiquid, and chances of hitting a jackpot are often bleak. Many stocks trading under $5 a share become de-listed from major stock exchanges and are only tradable over-the-counter (OTC). Unless you see a real opportunity and have done your research, stay clear of these.

6. Time Those Trades

Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, which contributes to price volatility. A seasoned player may be able to recognize patterns and pick appropriately to make profits. But for newbies, it may be better just to read the market without making any moves for the first 15 to 20 minutes. The middle hours are usually less volatile, and then movement begins to pick up again toward the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first.

7. Cut Losses With Limit Orders

Decide what type of orders you’ll use to enter and exit trades. Will you use market orders or limit orders? When you place a market order, it’s executed at the best price available at the time—thus, no price guarantee.

A limit order, meanwhile, guarantees the price but not the execution. Limit orders help you trade with more precision, wherein you set your price (not unrealistic but executable) for buying as well as selling. More sophisticated and experienced day traders may employ the use of options strategies to hedge their positions as well.

8. Be Realistic About Profits

A strategy doesn’t need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. However, they make more on their winners than they lose on their losers. Make sure the risk on each trade is limited to a specific percentage of the account, and that entry and exit methods are clearly defined and written down.

9. Stay Cool

There are times when the stock markets test your nerves. As a day trader, you need to learn to keep greed, hope, and fear at bay. Decisions should be governed by logic and not emotion.

10. Stick to the Plan

Successful traders have to move fast, but they don’t have to think fast. Why? Because they’ve developed a trading strategy in advance, along with the discipline to stick to that strategy. It is important to follow your formula closely rather than try to chase profits. Don’t let your emotions get the best of you and abandon your strategy. There’s a mantra among day traders: “Plan your trade and trade your plan.”

Before we go into some of the ins and outs of day trading, let’s look at some of the reasons why day trading can be so difficult.

What Makes Day Trading Difficult?

Day trading takes a lot of practice and know-how, and there are several factors that can make the process challenging.

First, know that you’re going up against professionals whose careers revolve around trading. These people have access to the best technology and connections in the industry, so even if they fail, they’re set up to succeed in the end. If you jump on the bandwagon, it means more profits for them.

Uncle Sam will also want a cut of your profits, no matter how slim. Remember that you’ll have to pay taxes on any short-term gains—or any investments you hold for one year or less—at the marginal rate. The one caveat is that your losses will offset any gains.

As an individual investor, you may be prone to emotional and psychological biases. Professional traders are usually able to cut these out of their trading strategies, but when it’s your own capital involved, it tends to be a different story.

Deciding What and When to Buy

Day traders try to make money by exploiting minute price movements in individual assets (stocks, currencies, futures, and options), usually leveraging large amounts of capital to do so. In deciding what to focus on—in a stock, say—a typical day trader looks for three things:

  • Liquidity:Liquidity allows you to enter and exit a stock at a good price. For instance, tight spreads or the difference between the bid and ask price of a stock, and low slippage or the difference between the expected price of a trade and the actual price.
  • Volatility:Volatility is simply a measure of the expected daily price range—the range in which a day trader operates. More volatility means greater profit or loss.
  • Trading volume: This is a measure of how many times a stock is bought and sold in a given time period—most commonly known as the average daily trading volume. A high degree of volume indicates a lot of interest in a stock. An increase in a stock’s volume is often a harbinger of a price jump, either up or down.

Once you know what kind of stocks (or other assets) you’re looking for, you need to learn how to identify entry points—that is, at what precise moment you’re going to invest. Tools that can help you do this include:

  • Real-time news services: News moves stocks, so it’s important to subscribe to services that tell you when potentially market-moving news comes out.
  • ECN/Level 2 quotes: ECNs, or electronic communication networks, are computer-based systems that display the best available bid and ask quotes from multiple market participants and then automatically match and execute orders. Level 2 is a subscription-based service that provides real-time access to the Nasdaq order book composed of price quotes from market makers registering every Nasdaq-listed and OTC Bulletin Board security. Together, they can give you a sense of orders being executed in real time.
  • Intraday candlestick charts:Candlesticks provide a raw analysis of price action. More on these later.

Define and write down the conditions under which you’ll enter a position. “Buy during uptrend” isn’t specific enough. Something like this is much more specific and also testable: “Buy when price breaks above the upper trendline of a triangle pattern, where the triangle was preceded by an uptrend (at least one higher swing high and higher swing low before the triangle formed) on the two-minute chart in the first two hours of the trading day.”

Once you have a specific set of entry rules, scan through more charts to see if those conditions are generated each day (assuming you want to day trade every day) and more often than not produce a price move in the anticipated direction. If so, you have a potential entry point for a strategy. You’ll then need to assess how to exit, or sell, those trades.

Deciding When to Sell

There are multiple ways to exit a winning position, including trailing stops and profit targets. Profit targets are the most common exit method, taking a profit at a pre-determined level. Some common price target strategies are:

Strategy Description
Scalping Scalping is one of the most popular strategies. It involves selling almost immediately after a trade becomes profitable. The price target is whatever figure that translates into “you’ve made money on this deal.”
Fading Fading involves shorting stocks after rapid moves upward. This is based on the assumption that (1) they are overbought, (2) early buyers are ready to begin taking profits and (3) existing buyers may be scared out. Although risky, this strategy can be extremely rewarding. Here, the price target is when buyers begin stepping in again.
Daily Pivots This strategy involves profiting from a stock’s daily volatility. This is done by attempting to buy at the low of the day and sell at the high of the day. Here, the price target is simply at the next sign of a reversal.
Momentum This strategy usually involves trading on news releases or finding strong trending moves supported by high volume. One type of momentum trader will buy on news releases and ride a trend until it exhibits signs of reversal. The other type will fade the price surge. Here, the price target is when volume begins to decrease.

In most cases, you’ll want to exit an asset when there is decreased interest in the stock as indicated by the Level 2/ECN and volume. The profit target should also allow for more profit to be made on winning trades than is lost on losing trades. If your stop loss is $0.05 away from your entry price, your target should be more than $0.05 away.

Just like your entry point, define exactly how you will exit your trades before entering them. The exit criteria must be specific enough to be repeatable and testable.

Day Trading Charts and Patterns

To help determine the opportune moment to buy a stock (or whatever asset you’re trading), many traders utilize:

  • Candlestick patterns, including engulfing candles and dojis
  • Technical analysis, including trend lines and triangles
  • Volume—increasing or decreasing

There are many candlestick setups a day trader can look for to find an entry point. If used properly, the doji reversal pattern (highlighted in yellow in the chart below) is one of the most reliable ones.

Typically, look for a pattern like this with several confirmations:

  1. First, look for a volume spike, which will show you whether traders are supporting the price at this level. Note: this can be either on the doji candle or on the candles immediately following it.
  2. Second, look for prior support at this price level. For example, the prior low of day (LOD) or high of day (HOD).
  3. Finally, look at the Level 2 situation, which will show all the open orders and order sizes.

If you follow these three steps, you can determine whether the doji is likely to produce an actual turnaround and can take a position if the conditions are favorable.

Traditional analysis of chart patterns also provides profit targets for exits. For example, the height of a triangle at the widest part is added to the breakout point of the triangle (for an upside breakout), providing a price at which to take profits.

How to Limit Losses When Day Trading

A stop-loss order is designed to limit losses on a position in a security. For long positions, a stop loss can be placed below a recent low, or for short positions, above a recent high. It can also be based on volatility. For example, if a stock price is moving about $0.05 a minute, then you may place a stop loss $0.15 away from your entry to give the price some space to fluctuate before it moves in your anticipated direction.

Define exactly how you’ll control the risk on the trades. In the case of a triangle pattern, for instance, a stop loss can be placed $0.02 below a recent swing low if buying a breakout, or $0.02 below the pattern. (The $0.02 is arbitrary; the point is simply to be specific.)

One strategy is to set two stop losses:

  1. A physical stop-loss order placed at a certain price level that suits your risk tolerance. Essentially, this is the most money you can stand to lose.
  2. A mental stop-loss set at the point where your entry criteria are violated. This means if the trade makes an unexpected turn, you’ll immediately exit your position.

However you decide to exit your trades, the exit criteria must be specific enough to be testable and repeatable. Also, it’s important to set a maximum loss per day you can afford to withstand—both financially and mentally. Whenever you hit this point, take the rest of the day off.

Stick to your plan and your perimeters. After all, tomorrow is another (trading) day.

Once you’ve defined how you enter trades and where you’ll place a stop loss, you can assess whether the potential strategy fits within your risk limit. If the strategy exposes you too much risk, you need to alter the strategy in some way to reduce the risk.

If the strategy is within your risk limit, then testing begins. Manually go through historical charts to find your entries, noting whether your stop loss or target would have been hit. Paper trade in this way for at least 50 to 100 trades, noting whether the strategy was profitable and if it meets your expectations. If it does, proceed to trading the strategy in a demo account in real time. If it’s profitable over the course of two months or more in a simulated environment, proceed with day trading the strategy with real capital. If the strategy isn’t profitable, start over.

Finally, keep in mind that if trading on margin—which means you’re borrowing your investment funds from a brokerage firm (and bear in mind that margin requirements for day trading are high)—you’re far more vulnerable to sharp price movements. Margin helps to amplify the trading results not just of profits, but of losses as well if a trade goes against you. Therefore, using stop losses is crucial when day trading on margin.

Now that you know some of the ins and outs of day trading, let’s take a brief look at some of the key strategies new day traders can use.

Basic Day Trading Strategies

Once you’ve mastered some of the techniques, developed your own personal trading styles, and determined what your end goals are, you can use a series of strategies to help you in your quest for profits.

Here are some popular techniques you can use. Although some of these have been mentioned above, they are worth going into again:

  • Following the trend: Anyone who follows the trend will buy when prices are rising or short sell when they drop. This is done on the assumption that prices that have been rising or falling steadily will continue to do so.
  • Contrarian investing: This strategy assumes the rise in prices will reverse and drop. The contrarian buys during the fall or short-sells during the rise, with the express expectation that the trend will change.
  • Scalping: This is a style where a speculator exploits small price gaps created by the bid-ask spread. This technique normally involves entering and exiting a position quickly—within minutes or even seconds.
  • Trading on news: Investors using this strategy will buy when good news is announced or short sell when there’s bad news. This can lead to greater volatility, which can lead to higher profits or losses.

Day trading is difficult to master. It requires time, skill and discipline. Many of those who try it fail, but the techniques and guidelines described above can help you create a profitable strategy. With enough practice and consistent performance evaluation, you can greatly improve your chances of beating the odds.

Day Trading Tips for Beginners

Image by Brianna Gilmartin © The Balance 2020

Like starting any career, there is a lot to learn when you’re a day trading beginner. Here are some tips to steer you in the right direction as you start your journey. These tips will get you set up with the proper equipment and software, help you decide what to trade and when to trade, show you how much capital you need, how to manage risk, and how to practice a trading strategy effectively.

Picking a Day Trading Market

As a beginner day trader, you may already have a market in mind that you want to trade. A pattern day trader executes four or more “day trades” within five business days. 

Stocks are the shares of the companies, such as Walmart (WMT) and Apple (AAPL). In the forex market, you’re trading currencies, such as the euro and U.S. dollar (EUR/USD). There is a wide assortment of futures available to trade, and futures are often based on commodities or indexes.   In the futures market, you could trade crude oil, gold or S&P 500 movements.

One market isn’t better than another. It comes down to what you want to trade, and what you can afford. The forex market requires the least capital to day trade. You can get started with as little as $50, although starting with more is recommended.   Trading certain futures markets may only require $1,000 to get started.

Stocks require at least $25,000 to day trade, making them a more capital-intensive option.   While more capital is required to day trade stocks, that doesn’t make it a better or worse market than the others. But if you don’t have $25,000 to trade (and can’t maintain your account above $25,000), then stocks likely aren’t the best day trading market for you. If you have more than $25,000, then stocks are a viable day trading market.

All markets offer excellent profit potential. Therefore it often comes down to how much capital you need to get started. Pick a market, that way you can start focusing your education on that market, and not wasting your time learning things about other markets which may not be of help in your chosen market.

Don’t try to master all markets at once. This will divide your attention and making money may take longer. Once you learn to make money in one market, it is easier to adapt to learn other markets. So, be patient. You don’t need to learn all markets at once. You can learn other markets later if you desire.

Equipment and Software for Day Trading Beginners

To day trade you need a few basic tools:

  • A computer or laptop: Having two monitors is preferable, but not required. The computer should have enough memory and a fast enough processor that when you run your trading program (discussed later) there is no lagging or crashes. You don’t need a top-of-the-line computer, but you don’t want to cheap out either. Software and computers are constantly changing, so make sure your computer is keeping up with the times. A slow computer can be costly when day trading, especially if it crashes while you are in trades, causes you to miss trades, or its slowness causes you to get stuck in trades.
  • A reliable and relatively quick internet connection: Day traders should be using at least a Cable or ADSL type internet connection. Speeds vary across these types of services, so strive for at least a mid-range internet package. The slowest speed offered by your internet provider may do the job, but if you have multiple web pages and applications running (that use the internet), then you may notice your trading platform isn’t updating as quickly as it should, and that can cause problems (see above). Start with a mid-range internet package, and try it out. You can always adjust your internet speed later if needed. If your internet goes down a lot, that’s a problem. See if there is a more reliable internet provider. Day trading isn’t recommended with a sporadic internet connection.
  • A trading platform suited to your market and style of day trading: When you are just starting, finding the perfect platform isn’t your goal. Download several trading platforms and try them out. Since you are a beginner, you won’t have a well-developed trading style yet. Therefore, your trading platform may occasionally change throughout your career, or you may alter how it is set up to accommodate your trading progress. NinaTrader is a popular day trading platform for futures and forex traders. There are loads of stock trading platforms. Ultimately, try out a few that your broker offers and see which you like best.
  • A broker: Your broker facilitates your trades, and in exchange charges you a commission or fee on your trades. Day traders want to focus on low-fee brokers since high commission costs can ruin the profitability of a day trading strategy. That said, the lowest fee broker isn’t always best. You want a broker that will be there to provide support if you have an issue. A few cents extra on a commission is worth it if the company can save you hundreds or thousands of dollars when you have a computer meltdown and can’t get out of your trades. Major banks, while they offer trading accounts, typically aren’t the best option for day traders. Fees are typically higher at major banks, and smaller brokers will typically offer more customizable fee and commission structures to day traders.

When to Day Trade

As a day trader, both as a beginner and a pro, your life is centered around consistency. One way to generate consistency is to trade during the same hours each day.

While some day traders trade for a whole regular session (9:30 a.m. to 4 p.m. EST, for example, for the US stock market), most only trade for a portion of the day. Trading only two to three hours per day is quite common among day traders. Here are the hours you’ll want to focus on.

  • For stocks, the best time for day trading is the first one to two hours after the open, and the last hour before the close. 9:30 a.m. to 11:30 a.m. EST is a two-hour period you want to get good at trading. This is the most volatile time of the day, offering the biggest price moves and most profit potential. The last hour of the day, 3 p.m. to 4 p.m. EST is also typically a good time for trading, as some sizable moves occur then, too. If you only want to trade for an hour or two, trade the morning session.
  • For day trading futures, around the open is a great time to day trade. Active futures see some trading activity around the clock, so good day trading opportunities typically start a bit earlier than in the stock market. If day trading futures focus on trading between 8:30 a.m. and 11 a.m. EST. Futures markets have official closes at different times, but the last hour of trading in a futures contract also typically offers sizable moves for day traders to capitalize on.
  • The forex market trades 24-hours a day during the week. The EURUSD is the most popular day trading pair. This currency pair typically records greater trading volumes between 1 A.M. and 12 P.M. EST. During these hours the London markets are open. Day traders should trade within these hours. The hours from 7 A.M. to 10 A.M. EST typically produce the biggest price moves because both the London and New York markets are both open, so this is a very popular and active time for day traders.
  • As a day trader, you don’t need to trade all day. You will probably find more consistency by only trading two to three hours a day. 

Manage Your Day Trading Risk

You’ve picked a market, have equipment and software setup, and sometimes know what is good for day trading. Before you even start thinking about trading, you need to know how to control risk. Day traders should control risk in two ways: trade risk and daily risk.

  • Trade risk is how much you are willing to risk on each trade. Ideally, risk 1% or less of your capital on each trade. This is accomplished by picking an entry point and then setting a stop loss, which will get you out of the trade if starts going too much against you. The risk is also affected by how big of a position you take, therefore, learn to how to calculate the proper position size for stocks, forex, or futures. Factoring your position size, your entry price, and your stop loss price, no single trade should expose you to more than a 1% loss in capital. 
  • Also, control your daily risk. Just as you don’t want a single trade to cause a lot of damage to your account (hence the 1% rule), you also don’t want one day to ruin your week or month. Therefore, set a daily loss limit. One possibility is to set it at 3% of your capital. If you are risking 1% or less on each trade, you would need to lose three trades or more (with no winners) to lose 3%. With a sound strategy, that shouldn’t happen very often. Once you hit your daily cap, stop trading for the day. Once you are consistently profitable, set your daily loss limit equal to your average winning day. For example, if you typically make $500 on winning days, then you are allowed to lose $500 on losing days. If you lose more than that, stop trading. The logic is that we want to keep daily losses small so that the loss can be easily recouped by a typical winning day. 

Practicing Strategies For Day Trading Beginners

When you start, don’t try to learn everything about trading at once. You don’t need to know it all. As a day trader, you only need one strategy that you implement over again and again.

A day trader’s job is to find a repeating pattern (or that repeats enough to make a profit) and then exploit it.

You don’t need a college degree or professional designation, nor do you need to read through hundreds of books, to do that.

Find one strategy that provides a method for entry, setting a stop loss and taking profits. Then, go to work on implementing that strategy in a demo account.

For forex and futures traders, one of the best ways to practice is using the NinjaTrader Replay feature, which lets you trade historical days as if you were trading in real time.

This means you can practice all day if you want, even when the market is closed.

No matter which market you trade, open a demo account and start practicing your strategy. Knowing a strategy isn’t the same as being able to implement it. No two days are the same in the markets, so it takes practice to be able to see the trade setups and be able to execute the trades without hesitation. Practice for at least three months before trading real capital. Only when you have at least three months in a row of profitable demo performance should you switch to live trading.

Stay focused on that single strategy, and only trading the market you picked, only during the time you have chosen to trade.

From Demo to Live Trading

Most traders notice a deterioration in performance from when they switch from demo trading to live trading.   Demo trading is a good practice ground for determining if a strategy is viable, but it can’t mimic the actual market precisely, nor does it create the emotional turmoil many traders face when they put real money on the line.

Therefore, if you notice that your trading isn’t going very well when you start to live (compared to the demo), know that this is natural.

Start with the smallest position size possible when you first begin live trading, as this helps alleviate some anxiety of losing large amounts of money.

As you become more comfortable trading real money, increase your position size up to the 1% threshold discussed above. Also, continually bring your focus back to what you have practiced and implementing your strategies precisely. Focusing on precision and implementation will help dilute some of the strong emotions that may negatively affect your trading.

Bottom Line

Pick a market you are interested in and can afford to trade. Then, set yourself up with the right equipment and software. Choose a time of day that you will day trade, and only trade during that time; typically the best day trading times are around major market openings and closings.

Manage your risk, on each trade and each day. Then, practice a strategy over and over again. You don’t need to know everything to trade profitability. You need to be able to implement one strategy that makes money.

Focus on winning with one strategy before attempting to learn others. Hone your skills in a demo account, but realize that it is not exactly like real trading. When you switch to trading with real capital, a bumpy ride is common for several months. Focus on precision and implementation to steady your nerves.

Day Trading Tips – The Best 5 Profitable And Winning Tips Ever

Day trading tips can come in a variety of forms. Each trader might want something different – from free stock tips, to tips on tax when day trading. On this page, we have tried to collate as many useful tips as possible, including our “top 10”. These range from psychology to strategy, money management to videos. So from beginners to advanced traders, we explain a range of free tips that can help intraday traders.

Top 10 Day Trading Tips

With a multitude of tips and tricks out there, what are the top 10 you should know about?

1. Always have a plan – The most important of all tips on day trading. Don’t put real money on the line until you have a plan of action. That means know what you’re buying and selling, how much you’re going to trade and when you’re going to trade it. A trader without a plan is a pig heading for an expensive slaughter.

2. Manage risk – It is vital you sit down and develop a risk management strategy. This will ensure you only lose what you can afford. Without one of these, your time as a day trader could be extremely short-lived.

3. Harness technology – With thousands of other traders out there, you need to utilise all the resources around you to stay ahead. With that being said, charting platforms offer a huge number of ways to analyse the markets. You can also backtest your strategy against historical data to fill in any cracks. Mobile apps will also ensure you have instant access to the market, almost anywhere. Combine that with a lightning fast internet connection and you can make fast, informed and accurate decisions.

4. Never stop learning – The successful trader never sits on his laurels, he’s always looking to trade smarter. Doing that means staying up to date with the news, utilising trading books, and staying tuned into emerging schools of thought. Markets evolve and you need to evolve right along with them.

5. Lead with facts – Make sure your strategy is based on, supported and backtested with facts. Humans are emotional beings and after a big win today you may be feeling abnormally brave when the markets open tomorrow morning. Don’t fall into this trap. Let facts and figures guide your decision-making processes.

6. Have entry and exit rules – There is no such thing as the ‘perfect entry and exit’. Stick only to the entry and exit parameters in your plan. If you start thinking ‘maybe I should see if this works’, think again. Maintain discipline and your bottom line will thank you for it.

7. Don’t concentrate on the money – This may sound counterintuitive, but it makes good sense. Having money at the forefront of your mind could make you do reckless things, like taking tiny profits in fear of losing what you’ve already won, or jumping straight in so you don’t miss a move. Instead, focus on sticking to your strategy and let your strategy focus on making you money.

8. Take responsibility – Too many traders lose and then proclaim the market was out for them. By not taking responsibility you won’t learn from your mistakes. Whatever happens, point the finger at yourself, in a constructive way. What did you do wrong? How can you stop it happening again? Do you need to amend your trading plan?

9. Keep a trade journal – Keeping a record of previous trades is an invaluable tip. Software now enables you to quickly and easily store all your trade history, from entry and exit to price and volume. You can use the information to identify problems and amend your strategy, enabling you to make intelligent decisions in future. You never meet a trader who regrets keeping a trading journal.

10. Know when to stop – If the strategy isn’t working, don’t keep throwing money at it. Go back to the drawing board and think again. If you can’t stick to your plan, don’t sit in the hot seat, you’ll only start on a slippery and a dangerous slope, and there’s definitely no money at the end of it.

Where to Trade

No tips will work if the broker used for trading does not deliver a good experience and can’t execute trades quickly and affordably. Here are a few of the recommended brokers in your location:

11 of The Best Day Trading Stocks Tips & Strategies

Day trading is one of the most-hyped — yet misunderstood — trading styles. There’s a lot of bogus information out there and plenty of misconceptions about what it takes to be successful as a day trader.

I’ve been a consistently profitable day trader for over 15 years, and use my experience to teach the students in my Trading Challenge and more.

Based on the knowledge I’ve gained over my career, here are 11 day trading tips and strategies for the stock market.

Table of Contents

What is Day Trading?

The term ‘day trading’ is often tossed around and used incorrectly, so let’s set the record straight on what it is — and what it isn’t.

Day trading refers to the purchase and sale of a stock within the same day. If a position is held overnight or longer, it’s not day trading.

Day trading isn’t exclusive to just one market, but it’s perhaps most commonly known as a method for trading in the stock market. Since I’m a day trader of penny stocks and that’s the focus of my teachings, in this article we’ll stick with day trading tips and strategies to succeed in the stock market.

Of course, day trading could involve buying and selling in other markets, such as the foreign exchange market (aka FOREX trading).

How Can You Profit From Day Trading?

As a day trader in the stock market, you’ll use various short-term trading methods, setups, and strategies to help you profit by capitalizing on the price fluctuations of stocks.

Can you profit from day trading? It depends on who you ask. Plenty of traders are quick to say you can’t — but these are usually people who have tried it and lost money because they didn’t bother to learn the basics before they started trading.

Risk in Day Trading

Is day trading risky? Yes, it can be. There are plenty of scammers out there who want to take advantage of you. Some brand themselves as teachers and make false promises, claiming they can teach you the “secrets” of the market and help make you a millionaire in a matter of weeks.

Others will try to take advantage of you as a new investor with pump-and-dump schemes . If you fall for the hype, you’ll likely end up as one of the infamous 90+ percent of traders who fail . But if you seek out a real trading education, you’ll learn to spot these scams a mile away.

But the risk inherent to day trading is part of what makes it possible to be profitable …

Since it carries a high risk level, many traders with large accounts or financial advisors tend to steer clear of day trading. They have the funds to take larger positions, so they can wait for longer plays to make profits. That’s why they scoff at day trading. Fine by me, because it’s less competition!

One of the big benefits of day trading is that it doesn’t require a lot of money to get started, so you can reap opportunities even if you have a small account . But you must learn how to mitigate risk.

To truly become a profitable day trader, it’s critical to learn the mechanics of the market, how to identify patterns , and to master short-term trading strategies that can deliver profits.

Day Trading Success Stories

I and many of my students are living proof that you can profit from day trading and maintain long-term success.

I’ve been trading since my teens, starting with an account of $12,415 of my bar mitzvah money. My parents gave me their blessing to trade with it, figuring I’d learn a hard lesson when I gambled it away. They were wrong.**

I applied myself, got obsessive about studying the market, and started identifying patterns for picking out good trades. While I’ve had ups and downs, I’ve been a consistently profitable trader for over 15 years.** I teach my students the tried-and-true methods that I’ve picked up over the years — not a get-rich-quick scheme.

However, just because it’s possible to be profitable as a day trader doesn’t mean it’s easy.

As a new day trader, especially when you’re just starting out, trading won’t be your primary source of income. While day trading can be learned and basics and classes are a huge help, time and experience are your biggest teachers.

Do you have what it takes to be a day trader ? Here are some traits that I look for in potential students:

  • A willingness to learn: If you think you know it all, or that you’ll be the one who’s exempt from studying, then you don’t have what it takes to become a profitable trader. To become successful, you must humble yourself and be willing to grow over time. You have to want it enough to apply yourself!
  • Discipline: My best students — and the most profitable traders — are disciplined. You have to study hard and often because you understand that you need an in-depth knowledge of the market in order to profit.
  • An edge: As a day trader, you must have an edge. This means developing your own unique style of finding setups that work for you. However, it’s still great to look at alerts and see what other traders are doing. By educating yourself, you’ll develop your own unique style. What do superstar traders like Tim Grittani and Stephen Dux have in common? They developed their own style over time. This gives them an edge.
  • A plan: The best traders are extremely tactical and approach trades without emotion. A trading plan can be your greatest asset. It helps you determine when to enter and exit trades, and what to do in the worst-case scenario.

11 Day Trading Tips to Skyrocket Your Profits

Do you want to be one of the day traders who makes it? Here’s your to-do list.

1. Identify Entry Points

In the trading sphere, the entry point is the price at which you enter a trade. It isn’t as simple as looking at the price and saying “Oh, looks good.” There’s an art to successfully choosing an entry point — and it’s backed by your research-based trading strategy.

Here’s an example of how you might approach an entry point …

Say you’ve been following a stock but the price seems too high to buy right now based on historical data. However, you determine that if the stock’s price were to drop by a certain amount, that would be appropriate. This is your entry point.

But don’t stop there. You also need an exit strategy. This is the point at which you’ve determined that it’s a good time to get out of the trade profitably.

How can you monitor if a stock dips to your desired level? Set up a scanning tool using StocksToTrade to determine when the stock reaches the entry point. If and when it does, you’re ready to buy with greater confidence.

Don’t be afraid to push the “order” button!

Pulling the trigger on your trade can be a scary moment. But if you’ve done your research, made a trading plan, and determined entry and exit points, don’t overthink it .

When the stock meets your criteria, push the order button. You’ll never undoubtedly know whether a stock will perform how you’d like, but once you have a plan in place, you can make your move with greater confidence.

2. Don’t Hit and Run

If you take the hit-and-run approach, you’re entering the market at its highs, and then exiting when it tapers off. But when it comes to day trading, this might not be the best approach.

3. Be Cautious with Selling Short

Short selling is a method you can use to profit when stocks are going down in value. It’s not illegal or unethical. Check out the Steady Trade podcast episode on legendary trader Jesse Livermore , and you’ll learn that this method has been in practice for over 100 years.

To sell short, you borrow shares from a broker, then sell them before buying them back, putting you in a negative position. If you shorted 500 shares, you’d see -500 (yes, negative) shares in your account. In an ideal world, the stock drops and you buy the shares back, netting the difference.

The easiest way to understand this: You’re still buying and you’re still selling, but you’re just doing a mirror-effect on how it’s traditionally done.

A caveat: In this method of trading, while the profits are virtually unlimited, so are the losses. I’ve used short selling with great success, but it requires a lot of caution.

For many, short selling isn’t the entry to trading, but something you work up to. Definitely try paper trading before diving into short selling as a day trader.

4. Limit Losses

This is my number-one rule above all else: Cut losses quickly. Just ask my students; I can be brutal when they break this rule. When a trade isn’t working, limit your losses and get out. Otherwise, the recovery is tough .

By determining your entry and exit points, you’re taking a proactive step to limit potential losses. You’re creating markers for yourself. When a stock’s price reaches your entry point, it’s like a green light. But if the price doesn’t perform as you’d like, you must have an exit strategy and stick with it.

You might lose some money, but don’t hold onto hope that things will turn around. They won’t. Trading should NEVER be emotional. Just suck it up and move on.

5. Implement Mental Stops

You determine mental stops in your mind. It’s a decision you make about when you’ll exit a trade or investment. If things start going south, you’ll trigger your mental stop and exit.

Having this exit strategy in place for any type of investment — whether day trading, swing trading, or another type of trading — can be the difference between mild and major losses.

Plus, once you make a resolution with yourself, you’re more likely to stick with it. This is a huge benefit if/when things get emotional during a trade’s progression. It helps you keep a level head.

6. Start Small

I’ve earned millions over the years, and most of my wins are small amounts that have accumulated over time. Because I’m a big transparency advocate, I post all of my trades on Profit.ly .

I constantly tell my students to focus on small but reliable profits. They don’t all need to be home runs. Smaller hits can add up to much bigger gains over time . Don’t take huge positions, especially when you’re just starting out.

Only trade with money you can afford to lose!

If a trade goes sour, you don’t want to lose your house — so don’t trade with money you can’t afford to lose!

Some say that when it comes to trading, you shouldn’t risk more than 1 percent of your total account on a single trade. This will keep losses small, but may also hinder your gains.

Depending on how small your account is, 1 percent could be very small, so in this case, you could consider raising the limit to 10 or 20 percent.

7. Set Aside Some Money to Fund Your Trading Account

Be sure that your trading account is just that. Don’t trade with your life savings!

You can find all sorts of thoughts online ( including my own ) about how much money you need to start day trading. While there are some factors like brokerage firms requiring minimums, ultimately it’s less about what you start with and more about what you do with your funds.

Regardless of whether you start out with $200, $500, $1,000 or $5,000 or even $50,000, it matters far less compared to how much knowledge you amass in the months and years you spend trading.

No matter how much you start with, you probably won’t make much in the beginning until you learn all the rules and repeatedly practice good trading habits .

8. Time Your Trades

Just like there are better times of the week and of the day to buy airline tickets online, there are prime times for you to buy and sell. Per a highly informative post on the StocksToTrade blog , here are some ideal times to buy or sell stocks:

  • The best time to buy stocks? Opening hours. The hour after the market opens and the trading session begins is a highly volatile time. It’s during this time that news since the last market bell is incorporated and buyers and sellers are reacting. For established traders, this first 15–60 minutes of the trading day is the best time to buy or sell stocks. Until you’re up to speed, the volatility at these times can prove challenging to brand-new traders.
  • Best day to buy stocks? Monday. According to StocksToTrade , “The Monday Effect is a well-documented tendency for stocks to drop on Mondays. This is a good time to buy on the dip.”
  • Best day to sell stocks? Friday. Contrary to the Monday effect, the end of the week is the best day to unload or to take short positions. A Friday preceding a three-day weekend can be particularly good for taking advantage of these phenomena.

Of course, these aren’t 100 percent set-in-stone rules. As the StocksToTrade post concludes, “The only par for the course is that the first and final hours of a trading session are almost always the busiest, and therefore tend to offer the most opportunities for day traders.”

9. Be Realistic About Profits

If you expect to make a fortune within weeks or months of embarking on a day trading career, you’ve got another thing coming.

Yes, there are superstar traders who start with small accounts and grow them exponentially within just a few years, but they’re the exception rather than the rule. Don’t focus on getting rich; focus on gaining experience and expertise. The more knowledge you gain, the more likely you’ll reap profits over time.

As you can see on Profit.ly , my average profit is just over $1,800. That’s not a world-changing amount. However, when added together over weeks, months, and years, my profits exceed $4 million.

10. Stick To Your Plan

Many of the tips I’ve offered here involve doing research, studying the market, and being tactical in your approach to every trade. But none of it will do you any good if you don’t stick to your plan.

Trading is as much a mental game as it is a money game. The actual trading part can take seconds, but choosing the right trade is where the real value in the process happens. By carefully crafting a research-backed trading plan and sticking to mental stops and planned entry/exit points, you’ll be far ahead of many wannabe day traders.

11. Remember That Knowledge is Key

Knowledge and self-sufficiency are critical to your success in this game. Penny stocks are volatile, so you must learn how to identify them and craft a plan on how to rapidly trade them, then execute.

It can be difficult and confusing at first. But trust me, with enough studying and putting your knowledge into action, you’ll begin to grow more confident. You’ll never be perfect. The stock market is not an exact science. But practice and continued study will make it easier over time.

Keep yourself updated with the Trading Challenge

To stay informed and sharp, my students receive live trading and Q&A webinars every week. You get to see me and my top students in action, even if the entire webinar is spent ruling trades out because there aren’t any good options.

You can learn from great plays and bad ones, too. If you can’t make the webinars, they’re all archived. I have hundreds of webinars from trading challenge students that can help grow your education and stay up to date.

What Else Do You Have to Keep in Mind?

Here are some other things to remember while performing your fundamental research as a day trader.

Candlestick Patterns

Many new day traders prefer line charts because they’re clean, easy to read, and seem familiar. However, candlestick charts can reveal many patterns and hold value for traders.

Instead of a single data point per interval, candlestick charts have four data points per interval: the high, open, close, and low.

The wicks represent the high and the low, with the bars’ ends forming the open and close. The color of the bar determines whether the top one is the open or the close. Red universally means down, but positive bars can be represented by green, blue, clear, or black, depending on the chart. Overall, there’s more information contained in the candlestick chart.

Liquidity of Shares

When it comes to trading penny stocks, liquidity is even more important than volatility. Liquidity essentially refers to how easy it is to trade shares of a stock.

One of the keys to day trading is the ability to move in and out of a position quickly, so you should always be on the lookout for stocks that are extremely liquid in relation to the capital you’re trading with.

Consider a stock that is trading a million shares a day. If you buy or sell 1,000 shares, you won’t influence the price in a big way, so you can get in and out of the trade easily.

But if you buy 100,000 shares, you have a much bigger influence on the price and might not be able to exit quite as quickly or easily. Because of the size of your position, it will be harder to find buyers or sellers to unload your shares when you need to.

Some of my biggest losses have resulted from taking positions that are too large, so I try to stick with smaller positions to limit the risk.

Volatility of Shares

A stock’s volatility is a measure of the price variance it experiences over time. By figuring out the volatility, you can gain a better understanding of how the stock’s price has historically fluctuated. It’s an important part of your fundamental research and can give you a better understanding of how the stock might perform in the future.

Volatility can be measured in different ways, but one of the standard methods is figuring out the standard deviation.

According to Investopedia , which offers a tutorial for figuring out the standard deviation, “In finance, standard deviation is a statistical measurement; when applied to the annual rate of return of an investment, it sheds light on the historical volatility of that investment.”

Volume of Shares

Volume is an indicator I care about when trading penny stocks because it helps determine the strength of a trend. The volume of shares is a way of looking at the number of shares of a stock that are bought and sold during a specific amount of time.

Each transaction counts as one unit of measure. So, for example, if 100 shares of a stock are bought and/or sold throughout the course of a day, the volume for that day would be 100.

The Bottom Line

Becoming a successful day trader is possible for anyone willing to put in the effort — but most people are just too lazy to put in the hard work.

Day trading is fast paced. Unless you have a strong knowledge base about market mechanics, it’s easy to get in over your head. My Trading Challenge is the perfect way to educate yourself, establish good study habits, and develop solid researching skills. These are the not-so-secret keys to success.

Are you ready to start day trading?

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