So you want to get into the world of day trading. You have been seduced by the rags to riches stories and now you want a piece of it.
In this article we are going to arm you with the information you need to help you along the way.
Before making your first live trade you need to understand the following :
- Choosing a broker
- Paper trading
Choosing a broker is the most important decision you need to make in your day trading career. There are 1000’s of brokers out there, all offering massive returns and an array of services. Stick to the old adage “If it sounds too good to be true it probably is”. No Broker can guarantee a return especially if you trading yourself. Brokers offering 300% returns are lying to you and are willing to do anything to get your business. Stay away from these.
When choosing a broker it’s important to take the following items into account. Brokerage houses need to be backed by a public company where you have access to their financials and balance sheets. This will give you confidence that they have staying power. They also need to be a regulated FSP and have a FCA number if you trading forex or indices. Lastly they should have offices and support in your country. This gives you legal support should you have any concerns.
To me the above is far more important than choosing a broker with the lowest spreads and offers the most leverage as day trading is a business, and you want the highest quality partner at your side when starting your business.
Now that you have chosen your broker, it’s time to start learning. There is a very daunting stat in day trading that is the 90-90-90 stat. This means that 90% of traders lose 90% of their income in 90 days.
To avoid being one of the statistics you need to do research. The most important things you need to learn are Candlesticks, Price Action and at least 1 trading strategy. Once you have mastered 1 trading strategy you can start adding more to you trading routine. Popular trading strategies include the Engulfing Strategy and the Opening Range Breakout strategy. There are many others, I would recommend getting a good book on popular trading strategies.
Next you need to understand fundamental and Technical analysis. Fundamental analysis involves studying how news events affect the market. Technical analysis is the understanding of charts and how to use indicators on those charts to determine price action. Common indicators include: Moving averages, Bollinger bands and RSI.
There is a wealth of information on the internet covering all of these items just make sure you get your information from a reputable company.
Paper trading is the last hurdle you need to overcome before you can start trading.
Paper trading involves trading in a demo account without risking real money. Most brokers offer a demo account and allow you to trade risk free as often as you like. You should trade on you demo account for at least 6 months before starting to live trade.
When paper trading you need to record every trade in an excel sheet so that you can learn and reference your trades before trading for real money. You daily entries must be detailed, so you can work out what worked for you and what did not.
A Typical entry would look like this.
1 Hour time Frame
Bought 1 Contract
Used Engulfing Strategy
Closed after 20 pips
Closed because there was a doji candle forming.
The reason for paper trading is that you are about to enter into a business and you need written evidence to yourself that you are worth investing in.
In summation day trading is a business, a profession and if you feel you are not armed with the correct broker, the right knowledge and belief in yourself that you can do it, then maybe it’s not the right profession for you.
Nobody said it was going to be easy but if you are persistent an exciting career awaits you.
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