Looking to become a day trader? Here are some things to know before you get started.
For a while now, you’ve been learning about the stock market, understanding the values of various companies and how they trade. You’ve also been learning some of the tips that professionals use that make them more successful. And you’ve been practicing this skill. But are you ready to take it to the next level? To become a daytrader?
The advantages of becoming a day trader are there, but not if you aren’t quite ready for it. We’ve got some information to help you understand what to do to take it to the next level so that you can decide if it is right for you.
Consider starting part-time
As you start to become a day trader, don’t feel like you have to jump into the whole enterprise at once. Sure, you’ll want to take your current activity to the next level, but take your first steps by escalating your current activities to between three and five hours a day. This allows you to make your investment of time gradually and make sure its the right fit.
There’s another advantage to starting at just a few hours — you’ll be using your time in the most efficient way possible. For all professional day traders, it has been said that there’s the best amount of return on trading close to the beginning and then at the end of the trading day. This approach also helps traders avoid mental fatigue and leaves them free during the day to work part-time in more traditional employment or at something else that interests them.
Line up the right tools
Most of what you need as you begin day trading is your knowledge, ability to do research, and instinct. However, you’ll need just a few physical tools too, and these need to be high quality. You’ll need a good computer or laptop, top-notch internet security, and a connection that’s as fast as possible.
You’ll also need a knowledgable broker on your team that you trust and that doesn’t charge you too much in fees and commission. Lastly, you’ll want to choose a couple of trading platforms to use. You don’t have to pick one and stick with it right away, but do some general research to try out ones you think you want to work with.
Once you have these tools lined up, you’re nearly ready to get started. There’s just one more thing to consider.
Pick the market you want to work in
One of the most important decisions you’ll make as you start to trade is the industry you’ll work in. Keep in mind that the costs of trading in each market are different so you’ll have to factor this into your decision too.
As you’re getting started, you’ll want to focus on a single industry. That allows you to get to know it better and discover its patterns, to get to know the industry and its players better, and to figure out its details. When you’re choosing an industry, keep in mind that the costs of trading in each market are different so you’ll have to factor this into your decision too.
As part of the patterns for your certain industry, you’ll particularly want to get to know how activity in your chosen industry changes on certain days of the week or during certain months. For example, across the board Monday afternoons can be good times to work, even more so during the middle of a month. While this timing works overall, there are likely nuances of trading during certain weeks or months that vary by industry. Look for them.
Lastly, if you don’t have much capital, consider starting in the forex market. This has requirements of just a few hundred dollars to start trading in, though higher amounts are recommended for better returns.
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Some say yes, others disagree.