Day trading is probably one of the most common concepts in the world of stocks and finances. For those new to the space, day trading is the process of purchasing a financial asset and selling the same asset within 24 hours. The idea is to take advantage of subtle movements in pricing, to earn a profit on your acquisitions. Learning how to day trade is a time-consuming process. After all, you need to make sure that you keep a close eye on the stocks that you purchase if you want any chance of making a profit. The good news is that when used correctly, day trading can be a fantastic way to build your wealth and accelerate your financial health.
Getting Started with Day Trading
There are many different factors involved in the act of day trading, from learning when it’s the best time to buy, to knowing when you should hold or sell an asset. Like any trading strategy, there are both risks and benefits to the act of day trading. The important thing to remember is that the more you know about a specific stock, the better off you’ll be.
The key to day trading is knowledge. You’ll need a strong understanding of basic trading procedures, as well as an insight into the latest stock market events and news that affect their assets. For many people, day trading is a process that requires consistent focus, and a dedication to learning about everything from economic growth, to interest rates. You’ll spend a lot of your time:
- Reading about company acquisitions and financial reports
- Scanning business newspapers
- Catching up with reliable financial sites
You’ll Need Plenty of Time and a Good Budget for Day Trading
Like any investment, day trading requires a careful strategy. To begin with, you’ll need to ask yourself how much capital you’re willing to risk on each trade. Most day traders risk less very little on each trade. This means that if you have a $20,000 account that you can use for trading, and you wanted to risk 0.5% of your capital, you would set up to $100 aside for that trade. As well as plenty of funds, you’ll also need a lot of time to focus on your day trading efforts. Day trading generally takes up a full work day. It’s not something that you can do during your spare time. Price changes happen rapidly, and you need to be ready to take advantage of them within an instant.
Start Small and Time Trades Carefully
When you’re just starting out with day trading, it’s best to keep your investments small. Focus exclusively on one or two stocks at a time, so that you don’t overwork yourself with too much to concentrate on at once. Once you’ve picked the stocks that you want to track, make sure that you time your trades with caution. The more you learn about the financial space, the easier it will be to pick up on patterns in the financial market and make profits. However, when you’re new, it’s a good idea to simply read the market for a while before you make any moves.
Photo Credit
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Guest Author Bio
Justin Weinger
Justin is a 37 year old husband and father of two under two! He works in corporate finance by day, and moonlights as a finance and investment blogger by night.
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