Day trading is one of the most popular trading strategies. Therefore, newbie traders think it’s one of the easiest ways to get additional income. However, it’s not like that. According to statistics, only 13% of day traders continue within three years after they started. In five years, only half of that 13% sticks to the day trading approach. Check out these vital tips for new day traders you won’t find in other guides.
1. Learn the basics
If you check the best tips for new day traders, it’s unlikely you will find information about order types. It seems so obvious that tutorial writers forget to mention it.
There are market and limit orders. Market orders are placed immediately at the best current price, while limit orders are executed if only the price reaches a certain level. Moreover, there are numerous types of limit orders.
You should learn each type to cover all potential trades. When trading within a day, you need to react to rapidly changing market conditions quickly. Therefore, you will succeed if only you can analyze the market in advance and place pending orders.
2. Don’t have overly-high expectations
One of the top questions in search engines is “how much does a new day trader make?” If you start trading with a dream of a fortune you make in a week, you will definitely lose.
First, there is no certain amount you will get in a particular period. Even if you consider trading as your primary job, you won’t have an employer who will pay you twice a month. It’s best to consider trading a business. You probably know that in the first months, businesses don’t earn. It’s pretty lucky for a company to just cover its expenses and avoid a negative balance.
Second, you should keep in mind that day trading is one of the most challenging trading strategies. It requires lots of skills, knowledge, and patience.
3. Control your rewards and losses
Every trader should keep an eye on their income and losses, especially day traders. The day trading strategy implies opening and closing positions within one trading day. That is, it’s riskier than any other approach allowing for longer-term trades.
One of the most frequent mistakes new day traders make is a lack of money control. To control how much you make, you should track the success of your trades. There are two options for determining whether you trade effectively.
First, you can calculate the percentage of winning trades. For instance, if you have 45 successful trades out of 100, your win rate will be 45%. But, to be a successful day trader, the percentage should always be above 50%. Also, you can compare the amount of winning trades to losing ones. If, on average, you lose $100, but your successful trades result in $125, then the ratio will be 1.25 (125/100). To confirm you are moving in the right direction, your ratio should stay above 1.25.
4. Mix things up
The lack of routine is one of the new day trader advantages. You may be confused because a routine and planned trading are the keys to success. However, this recommendation is not about random trades. It’s about a lack of habits. When you are an experienced trader, you have developed certain approaches and chosen assets you will trade.
Therefore, it’s unlikely you will want to try something new. But when you are a new day trader, you can trade various assets, mix them, and look for negative correlations. Yes, it’s the idea of this tip. You should place trades that don’t positively correlate. So that, if you lose on one trade, you should have a chance to earn on another.
If you decide to be a day trader, you should have numerous tools to place winning trades. Research a lot and test strategies, indicators, patterns, and various assets on a demo account before entering a real market.