How to Become a Successful Day Trader

Trading stocks can be both exciting and financially rewarding. But it’s also not something you should get into without the right preparation. You may be enticed by big financial gains, but remember that many people lose on their investments too, particularly when they are not adequately prepared. It’s therefore crucial that you understand what makes a successful day trader before getting started.

What is day trading?

Day trading is an active and usually full-time pursuit. It involves buying and trading specific stocks and securities within the same day. This is done by monitoring the markets as they move, as well as news events as they affect the world and other investors. While day trading was previously restricted to big businesses, new technology now means that almost anyone can get involved via online trading platforms. But it’s not necessarily for everyone and can depend on your trading style.

How is it different from other trading?

Most individuals engage in trading that involves much fewer trades, with positions and portfolios often held for months or even years at a time. It’s much slower paced and can be done around another full time job. Day trading however is much faster paced, with many trades taking place every day. It’s often a full time pursuit and involves constantly buying and selling based on the changing landscape of the markets.

Get to know yourself

Day trading isn’t for everyone. It requires dedication and a natural ability in some specific skills. That’s not to say that you can’t nurture these skills, but you’ll want to feel confident in these areas before you get started.

Importantly, you need to have strong mathematical ability, a real interest in financial markets and an awareness of behavioral psychology. It’s vital that you not only have these skills, but also consistently keep them up to date. How are the way financial markets act changing? How is new technology changing the financial industry?

On top of all this, you also need to know that you have the time, interest and dedication to make day trading a success. Day trading often means long hours and a consistent commitment to the job. If you’re looking for a part-time side hustle, this probably isn’t for you.

Understand and monitor the market

To be successful, you must have the time and the resources to not just monitor the markets, but to truly understand them. At its core, you must understand how financial markets operate. Without this foundation, it’s very unlikely that you’ll find success.

It’s not just about watching markets, but about watching the wider world too. An interest in world affairs and political developments, as well as an understanding of how people might react to them, will allow you to make the right trades at the right time. You might find that it in turn enriches your life too.

Test and simulate

No one expects anyone to get everything right the first time. That’s why pencils come with erasers, after all. When you put any plan in place for the market, you should test it first whenever possible using virtual money and a simulated market.

Most brokers offer these test accounts which provide a way to make sure your plan will operate as you expect it to. You may feel confident, but you should still make sure you haven’t overlooked anything before you make that crucial real world trade.

Have a dynamic strategy in place

Before getting started, you should have at least two trading strategies in place. Each is the back up plan for the other, so you are covered for opposing potential scenarios. This way you leave yourself options as markets change. There are many beginner strategies that you might want to consider when first starting out.

These plans however also need to be dynamic and react to real world events. Don’t be so rigid in your plans that you cannot adapt to new information. If you’ve planned effectively, but are ready to change when needed, you give yourself the best possible chance at success.

Start small at first

Once you have your tests in place and feel confident with your strategy, it’s important to not overstretch yourself. Start small with your first trades until you feel confident with the trading platforms and how they work. Then, when you feel ready, slowly introduce bigger trades. You might also want to gradually increase the frequency of trades until you’re making dozens of trades each day. Importantly, make sure you always feel in control and only take the next step when you feel ready.

Anyone looking to get into day trading should do so with their eyes wide open and be aware of the challenges, as well as the massive opportunities. Day trading can be exciting and rewarding for those who find success. If you’re interested and have the right personality type, then now might be the perfect time to try day trading for the first time and see if it’s right for you.

If you have any questions, please ask below!