Buying and Selling a financial instrument within the same day or several times throughout the day is known as Day Trading. The benefits of small price movements can be extremely rewarding if done correctly. However, it can be a risky game for newbies who don’t follow a well-planned strategy.
It is important to select a well-designed broker which is suited for high volume trades. Mexem Africa has a professional, advanced and easily customisable platform that includes real-streaming data, professional charting tools and the ability to enter and adjust complex orders in quick succession.
Below, we’ll look at some general day trading concepts and tips to follow when executing trades:
- Set aside enough time in your day to focus on your trades:
When it comes to day trading it is extremely important to set aside time. That’s why it’s called day trading. Day trading requires a trader to track the markets and notice opportunities, which can arise at any time during trading hours. When it comes to day trading, moving quickly is vital.
- Knowledge is vital:
Many people do not realize the potential of knowledge in this industry. Day traders need to keep up on the latest stock market news and events that affect stocks. It is significant to understand the nature of the market in order to find potential opportunities in the market.
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. Look out for business news, economic outlooks and make sure you are viewing reliable financial websites.
- Make sure to time your 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.
Traders begin executing orders the minute the market opens in the morning. As a result, price volatility is affected. A professional and experienced investor may be able to identify patterns in the market and pick correctly to make returns. However, for beginner investors, it would be advisable to read the market without making any moves for the first 15 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. Once beginners become more comfortable then trading during big price movements can be extremely beneficial.
- Use limit orders to limit against your losses:
When entering and exiting trades you will need to decide what type of order you want to use. When an investor places a market order, this order is executed at the best price available at the time—consequently, there is no price guarantee on your order.
However, when placing a limit order, this will guarantee the price but not the execution. This will allow you to meticulously trade by setting a precise price for buying and selling a trade.
Another beneficial tool is to place a stop-loss order. This will allow an investor to limit their loss on a position. For example, setting a stop-loss order for 5% below the price at which you bought the stock will limit your loss by 5%. More advanced day traders may also use options strategies to hedge their positions as well.
- Make sure to follow the plan:
The most important tip to follow is to stick to your plan. Developing a trading strategy in advance is important but having the discipline to stick to the strategy is even more vital to successful trading. It is imperative to follow your formula thoroughly rather than try to chase profits. Don’t let your emotions get the best of you and abandon your strategy. There’s an important mantra among day traders: “Plan your trade and trade your plan.”
- Stay calm and stay cool:
Often in investing in the stock market traders let emotions get the best of them. The most important tip is to stay cool, calm and follow the plan. The decisions you make should be governed by logic and not emotion.
Day trading requires knowledge, time, discipline and skill but, with enough practice and consistency, you can greatly improve your chances of beating the odds.