Day Trading for Beginners in 2023

If you are new to day trading or trading in general then trust me you are not alone. I was like you few years back. I started reading books, online articles, watched many videos, and took a couple of online courses before actually jumping into trading especially Day-trading.

***Disclaimer – Day trading is not a get-rich-quick scheme and this article is designed to give you information about Day Trading. We are not trying to provide any advice or suggestions. It’s purely educational.

To master the skill of Day Trading one needs to gather knowledge, skills and practice. We will try to discuss everything you may need to get started with day trading.

 

 

What is Day Trading?

Trading means buying and selling something. In day trading you buy and sell financial instruments like stocks, foreign currencies, futures, options, commodities, crypto currencies etc. within the same day. The focus is on short-term market activities and trying to make profits before the market closes for the day.

There are multiple tools that a day trader uses like Technical Analysis, Charts, trading strategies, etc., with an intention to execute them as quickly as possible and close all the positions within the same day.

Think of day trading as a high-risk, high-reward strategy and to succeed you need to invest in yourself and gain the necessary knowledge, skills and experience.

After reading this article you can decide whether you want to invest your time and efforts to learn and become a day trader or not.

 

 

How to Day Trade for Beginners?

If you are a beginner like I was a few years back and have read or watched about day trading, then it’s natural to feel overwhelmed and you may feel unsure about where to begin. However, don’t worry we have tried to compile steps that can help you navigate through the initial stages of day trading.

Learn the basics of the stock market:

To understand day trading you need to understand the trading jargons/lingo that we listen in financial news or the terms that traders use in their day to day conversation or in videos or the terms we see on many online trading platform.

It’s almost impossible to start day trading without getting the basics right. It is like surviving in a foreign country without knowing their language, without understanding that country’s language you may survive but it will be really difficult, however, if you learn their language prior to entering the country the journey becomes very smooth.

So, learn about:

• Basic terms about stock marketing
• How does the stock market work?
• Operating hours of the stock market?
• Basics of Technical Analysis and Charts.
• Learn to view the candlesticks.
• Learn about Trends.
• Buying prices, selling prices, spreads, buy limit, sell limit, stop loss, market execution, etc.
• Indicators.

Research thoroughly about different investment strategies, indicators, and market trends so that you are all set to make informed decisions rather than randomly trading.

Select a Trading Platform

Day traders need to be in touch with the market throughout the day, and should be able to view the charts/ candles showing real-time buy versus sell prices on the go. In day trading you can afford to lose time as time is of essence especially when you have to close your positions within the same day.

There are many online brokers that provide trading platform and you need a broker to place your trades. Read more about Basics of Brokerage account.

Try to find an online trading platform keeping in mind the below points:

Educational resources: In order to help the investors take maximum advantage of the online platforms, brokers offer a wide range of educational resources that helps the new traders to improve their trading skills and stay in touch with latest market development.

I have used few demo accounts just to take advantage of their webinars, tutorials and research reports.

Customer Support: Look for a platform that offers a 24/7 support, be it live chat support, emails or phone support. Also, find those trading platforms having a solid knowledge base and FAQ section.

Asset Selection: As the tradable securities are increasing day by day, look for a platform that offers a wide range of securities to choose from, including stocks, bonds, commodities, forex, metals, and crypto currencies. If you are interested to trade in foreign markets then look for platforms that have accessibility to international markets.

Mobile App: Many times we don’t have time to open our laptop or computer to trade and we try to use our mobile phone for majority of our tasks. Look for a platform that allows you to trade on the go, i.e., a user-friendly mobile app designed for Android, iPhone, and tablets.

Funding & Withdrawal: Before finalizing a trading platform do check the methods available to deposit and withdraw funds to & from your account.

Select a broker

Now you know that you need a broker to place your trades. At this point research and try to find a broker keeping in mind the below points:

• Broker should be regulated

• Uses encryption technology to protect your personal and financial information.

• Has as robust & user-friendly trading platform.

• Offers demo account, micro account and standard accounts.

• Has an excellent customer support.

• Knowledge base.

• Easy withdrawal & deposit methods and

• Low commissions & fees.

Open Trading Account:

Once you have decided a broker next steps is to open a Trading account, so that you can place orders and monitor your trades/portfolios.

Keep in mind the below points before opening your trading account:

• Choose a reputable broker.

• Choose an account type that meets your requirements, most of the online brokers offer Demo accounts, micro accounts, and standard account.

***If your broker provides a demo account, do practice on demo account for some time and familiarize with the basics and get used to of the platform.

• Account registration – Registering may take a day or two, as brokers need to verify your identification documents (passport/drivers license/bank statements/utility bills etc.)

• Deposit funds – You can deposit funds after all the verification is completed by your broker. Mostly brokers allow depositing funds via bank transfers, credit card, debit cards, wire transfers, and e-wallets.

Practice trading:

Every experienced trader advices to practice with a demo account before you start with real money. It gives you experience to understand the platform and trading in general. And you can get a feel of the market. You can even practice your strategies or test various indicators before actually using.

Below are some tips:

Demo accounts – Every reputable broker offers a demo account that allows you to practice trading with virtual money with real market conditions.

Paper Trading – one of the widely used methods to practice trading is a paper trading account. In this method you track your trades on paper without placing any real trades. It’s an old school method and a very effective one and it’s risk free too

Back testing – It’s a process of testing a trading strategy and analyzing the historical data to observe how it would have performed in past. Choose a trading platform that provides back testing tool. It’s one of the fastest ways to find out the chances of your strategy to work or not.

Keeping a journal – It is similar to paper trading but keeping a trading journal is a great way to track your progress and maintaining lessons learned while trading. It helps you to analyze your trade and identify probable patterns and helps you improve your trading strategies.

Start trading:

After educating yourself, selecting a broker and trading platform, opening a trading account and practice trading, it’s time to start trading with real money.

Tips for Day Trading Beginners –

 Below are some tips that can help you succeed as a day trading beginner:

Start small: when you start trading with real money, it’s a good idea to start with a small amount of money and as you gain experience you can gradually increase your investment. Give yourself time to learn without risking too much of your money.

Keep it simple: Don’t enter into too many trades, i.e. don’t buy/sell too many stocks at once. Focus on few stocks or forex or metals and try to understand their behavior. For example – notice how Gold and USD behave by studying XAUUSD charts, see their opening prices, fluctuations, closing prices, study the 5 min chart, 15 min chart, hourly chart, daily chart and so on. Make a bond with your favorite stocks or currencies or securities and stick to them.

 Don’t get emotional: You have already spent time in educating yourself, and this time to use that knowledge. Don’t get carried away or be emotional. Keep your emotions in check. Don’t let fear, greed, or hope drive your decisions.

Day Trading Strategies

Many traders have developed their styles of trading and universally we have named these strategies too. Below are some most common day-trading strategies:

Scalping: This is a very popular day trading strategy in which traders make small profits from frequent trades. They look for opportunities to enter and exit the trades very quickly usually within seconds or minutes and they focus on the 1 minute candle chart. Intention is to focus on small gains that add up over time to make a big one.

Momentum trading: This strategy involves identifying the assets that are moving in a particular direction and entering a trade in the same direction.  For example – if the market trend is bullish then buy an asset and if it’s bearish then sell an asset. In this strategy a trader looks for assets that make new highs or new lows or have high trading volumes. It’s basically buying stocks that are trending up and selling stocks that are trending down. So, a trader hopes that the trend continues.

Swing trading: It’s technically not a day trading strategy but one of the most widely used one. In this strategy a trader holds stocks for few days or week, they basically find the stocks that have a consistent trend in one direction and are expected to continue moving in the same direction for a while.

News Trading: In this strategy traders trade assets based on the news events and market developments. Focus is to identify the assets that are likely to be affected by news events like earning report or economic data release, mergers & acquisitions or government regulations.

Day Trading Mistakes to Avoid

Trading without a plan: Day trading without a plan can lead to impulsive decisions and emotional trading.

Trading without a stop loss.

Overtrading: Overtrading can lead to high fees and losses due to excessive trading.

Failing to cut losses: Failing to cut losses can lead to large losses if a trade goes against you.

Trading with emotions: Trading with emotions can lead to irrational decisions and losses.