One can access the internet through desktop, laptop or mobile. Digital revolution has flooded the market with many opportunities online. Out of these, one such is online trading in stock market.
People can make money online by day trading from the comfort of their home or office. Online trading is gaining popularity on this front in present time.
Must Read: Top ten day trading secrets for beginners
As with any other businesses, not everyone achieves success in day trading. Only those who work hard, gain knowledge, analyze and have the burning passion to achieve it are successful. They are the people who stand out from the herd.
Day trader buys and sells securities (bonds, shares, MF, etc) mostly on the same day. Mostly dealing with shares/stocks. He squares his accounts at the end of the day. Rarely does he keep his position open for the next day. In other words, day trader completes his transaction of buying and selling mostly on the same day.
Top ten steps you need to know to become a day trader
- You should have a clear mindset regarding how much time you are willing to spend for day trading. You should be also clear how much amount you are willing to put in. Once you have decided on the above you can proceed further.
Must Read: How to start investing for a useful purpose?
- Next is arranging for funds that you wish to put in. Usually called seed capital or the base capital. It should be sufficient enough to get good returns for the time and energy you put in.
- Next is gaining knowledge of the present market. You should be able to read charts, do some mathematical calculations and apply your logic. Observing how the market works. How it reacts to the news when the government makes some changes in its policies or introduces some schemes. You should know about the margin money (loan offered by brokers) requirements.
- The day trader should have at least working knowledge of how other securities like bonds, mutual funds, forex, futures, and options work.
- A successful day trader has a strategy prepared in advance on which he works. As time goes by, he fine tunes these strategies, with every profitable or loss trades.
- Once the strategies are in place. They are tried and tested with each passing trade. You will have to finalize your day trading plan. You will have to ask few questions to yourself. How much money will you invest in trading? How frequently will you trade? Which sectors or industries you will trade in?
- Money management is one of the most important factors you should work on. That is allocating a certain fixed amount of money for each trade. You may be having few trades in a day. Maybe, two or three trades a day in the beginning. This number can be increased in future. You will have to fix your risk-reward ratio. In beginning it can be 3:1 and later on it can be changed to 5:1.
- Day trading is done through brokers. Brokers are broadly of two classes. Full-service broker and discount brokers. They charge their fees according to the trade. Day traders prefer discount brokers. Some discount brokers charge a flat fee and some other charge on monthly basis.
- Note down in detail each and every transaction that you enter. This way you will be able to collect information on your trades. This information should be analyzed for making and fine-tuning your future strategies. Historical data so gathered, will help you in knowing your weak and strong points. This will help you while formulating your strategy.
- Always use stop-loss while trading for each and every trade. It will contain your losses. In beginning, when capital and experience is limited, stop loss plays a vital part in your day trading. Better start with small amounts to test water. Once you are confident of picking up good trade then gradually you can increase the amount.
These above ten points will safeguard you in your day trading endeavors. Though the process is a bit time consuming and needs extra efforts from your side. But it is worth it to be a better day trader.
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