Online trading is a popular means of making money these days. Many people, mainly youngsters, do this full-time to make a living. Seasoned traders often develop a unique trading style with time, like day trading. Day trading means selling and buying securities quickly. It means the trader would not hold them to themselves and circulate in the market over time. So, it is a skill only experienced traders have, and newbies should avoid it initially if they are looking only to make money. If they are open to risks, they can do their research and read about platforms like eToro reviews.
A quick look at the basics
The first thing to understand is that day trading is hardly affected by the overall fluctuations in the market. If the market moves, day traders have more chances of earning money. Further, day traders can stay very active, making multiple trades over a few hours. Other traders can make a single exchange during the day. It is subjective and depends on how they feel comfortable and how the prices are going.
A trader can either execute the trades themselves or hire brokerage firms. One thing to beware of initially is that day trading can be mentally exhausting and emotional. So, one needs to stay headstrong and not go with the emotions. To do so, one would need to train themselves for some time before getting into day trading.
How much does a day trader earn?
If someone is looking to make quick cash, day trading is not the best way. The exact amount would vary with the following factors.
- The previous experience of the trader
- The level of discipline
- Trading strategy
- The ability to limit the losses
- The initial amount of trading
Further, the amount would also differ on how the trader is operating. The ones trading through brokers would earn differently from what a private trader does. If someone is working full-time and day trading on the side, they would have a consistent source of income.
What do traders need to start?
Here are all the tools and requirements for day trading.
- A device – laptop or computer
It is one of the necessary things one needs to start day trading. One can also have two monitors, but it is not necessary. Nonetheless, the device should have enough fast memory to avoid crashes or lag—no need to purchase the most expensive thing. However, one needs to get a device with smooth operating software and great features.
If the device is slow, it would cost a lot to a day trader. The worst would be the device crashing when one is between placing their trades.
- Trading platform
In the beginning, one can download several platforms and try each one. It is the best way to start and see what platform works out for them. Beginners can benefit from this because they do not have a particular trading style in the beginning. One can also switch or alter between several platforms like eToro reviews.
These are individuals or firms who facilitate the trade execution for the traders. They do charge a fee for their services. Since day traders earn a little less, they would want to look for a broker with a low fee. It will ensure they earn a decent profit.
However, one would also wish to find a broker with a good experience. Choosing a service provider based on the fee is not a wise option. Spending a little more on the commissions would not hurt if the broker provided long-term benefits.
As mentioned before, day trading needs some level of expertise. So, here are some tips for beginners.
- Acquiring knowledge is a must!
Of course, one would need to know about the dos and don’ts of day trading. Apart from this, they should also know the basics of the market. It is also crucial to keep tabs on the latest news from the market. For example, one can read about the Federal Reserve System, important announcements, new listings, delistings, etc.
- Allocating funds
It is crucial to ensure one is not putting all their eggs in a single basket when starting. It is wise to have a definite sum or assets allocated to trading. Before doing so, one should also consider their other expenses such as utility bills, emergency funds, etc. Spending all the money on trading is a risk because one may lose it all with nothing in hand. So, trade for what one can afford to let go.
- Make time for trading
Like learning new skills or leisure activities, one needs to allocate time to trading each day. Day trading needs plenty of attention and time. So, one would need to focus only on trading while they are at it. In the beginning, it usually takes up most of the day (8-10 hours). So, one can allocate the time as per their schedule and other commitments.
- Start with a small amount
All the experts and professionals suggest starting small. Some newbies may read a few articles, get excited, and trade for huge sums. But, it can be disastrous. So, it is always wise to start with a small amount to be okay even if one loses it. Also, it is easier to trade with small opportunities and stocks in hand. Trading in large volumes is often hectic and overwhelming, making it something for experienced folks only.
- No penny stocks
Yes, starting with low-price stocks is good. However, it does not mean one needs to trade in peanuts. These penny stocks are usually illiquid, and the chances of making a good profit are low. Some of these are also on the verge of getting delisted anytime. If it happens, one will lose their money. So, dealing in penny stocks is not a good idea.
With these tips in mind, beginners can start with trading. However, if they do not feel confident, starting small and hiring a broker is better.