According to FINRA rules, you can be defined as a day trader only if you executive 4 or more trades within 5 business days. There are other rules associated with that as well, but the most important thing for you to know is that not everyone who trades a lot can be considered a day trader.
Indeed, it’s a rare individual who can day trade and keep up with it over an extended period. If you think you have it in you to start day trading and become a successful day trader, then you are in the right place. We will tell you exactly what you need to get started with day trading, so keep reading our trading guide below.
1. Open a Brokerage Account
The first thing you need to do when you wish to start day trading is open a brokerage account with a financial institution or union that you trust. It could be with the bank that you already have all your accounts at, so it’s easy for you to move funds in and out. Or it could be with an online no-fee or low-fee brokerage account.
Make sure that the brokerage you go with allows for a demo or practice account, so you can practice with a few trades before getting into the deep end. Too many traders jump into trading with real money out of the gate, but they haven’t built a strategy or practiced any trades yet. That could be a dangerous situation if you aren’t careful.
2. Build Your Strategy or Trading Plan
There are so many different ways to make money when day trading. Many strategies and trading plans are available to you, so you need to figure this out first. Which one will you pick?
These are some of the steps to take to build a strategy that works for your skill set, experience level, and personality.
- Choose a trading time frame
- Figure out what your market ideology is
- Decide on which market you will do your trades in (Forex or Crypto or…)
- Define your entry trigger
- Figure out what your exit trigger will be (before getting into a trade)
- Define your risk tolerance levels and figure out how much you can risk losing
- Write down all your trading rules so you have them at hand
Answering all these questions will help you hone your trading strategy, at least in its basic form at first. Make sure to think carefully about the answer to each question above so you can build a solid strategy specific to your needs and level.
Don’t worry though, you aren’t stuck with this trading strategy forever. As you get more experienced and learn more about the market, you will need to modify your strategy to match the changes in the market and yourself.
3. Start a Trading Journal
This is a big piece of advice that a lot of expert successful day traders give to beginner day traders, but most never follow through on it. A trading journal, if you keep it well, will become the most important tool for you as a day trader.
What is a trading journal? Just like you would record your thoughts, feelings, triumphs, and failures in a regular journal, you do the same in a trading journal. Only that you focus entirely on your trades.
Write down every trade that you ever do, the reasons you got into and out of it, what strategy you were following, and why it worked or didn’t work. Also, put down any emotions you were feeling, so you can figure out when you are trading out of greed, fear, or FOMO.
Don’t ever skip a day when writing your trading journal. Over time, the more meticulously you keep your trading journal, it will become a sort of guide for you on how you trade, what your weaknesses are, and how to overcome them to put in solid successful trades.
4. Set Goals and Know Your Limits From the Outset
This is an important step to follow when day trading. Too many day traders put in too many trades, don’t have proper goals or limits set up for themselves, and end up losing their shirts and more.
You don’t want to be just another statistic. That’s why it’s important for you as a beginner day trader to figure out why exactly you are in this business.
What are your financial and other goals for your day trading business? How much money do you want to make, how many trades do you want to put in weekly, and how much money can you afford to lose?
The more you are aware of your limits, the better you will be able to perform when it comes to day trading. You can push your limits as far as they go, without stumbling around in the darkness and losing all the money you put in (and more).
Remember those day traders who have been in business for a long time, haven’t stuck to it only because they are persistent. It’s also because they built up their experience over time and gained that valued expertise. But if you have to leave the day trading business early because of failures, mistakes, and losses, then you will never get there.
5. Get Recommendations From Experts
There are many day trading tools out there. Affordable indicators in a day trading software can be a great voice to follow when putting in trades, especially when you are a beginner day trader and looking to learn.
Also, you could follow many experts and gurus in the field, and get recommendations from them, if that’s something you are comfortable with. No matter whose advice or recommendations you get, you always have to do your due diligence on all these trades.
You can’t go crying to them after and say that it was their fault you lost money, especially if you went into it as a willing, consenting, and intelligent adult.
6. Stick To Your Plan – Master Your Emotions
The most important thing you need to master when learning day trading isn’t the strategy, indicators, or market. It’s your own emotions.
So many trades could have gone right but went askew because the beginner day trader let his emotions get the better of him. Don’t let fear, greed, fear of missing out, or other such negative emotions guide your trading strategy.
You have a plan that you created at the beginning of your trading journey. Stick to this plan like glue, even if there are forces all around you telling you to go otherwise. Don’t run hither and thither after trades fluttering in the wind, because you are letting your emotions guide you.
The best way to master your emotions is to stick to your trading strategy. If you said you were going to get into a trade at a certain point and exit at another, follow this strategy even if your fear or greed is telling you to do something else.
7. Be Patient
You are not going to become a great day trader overnight. Folks work at it for years, even decades, before they can comfortably say that they are experts in the field. And even then the market is ever-changing and trades and trading strategies have to be modified to follow.
If you get impatient with yourself, that’s going to get you nowhere. Think of learning to day trade as a lifelong journey and you are just at the beginning of it.
Go step by step and as slow as you need to go – there’s no rush here. Don’t put too much pressure on yourself to be successful right away. You will end up making bad trading decisions if you do that.
The more you can keep your emotions out of the way and stay patient towards a long-term future goal, the better day trader you will become over time.
Start Day Trading With Gusto and Enthusiasm
We live in a great age indeed, where anyone who owns a laptop or a phone can start day trading without needing any permissions or licenses or anything like that. It wasn’t like this in the past, so we should feel grateful for the improvement.
But that doesn’t mean that when you start day trading, it won’t be fraught with difficulties, troubles, and challenges. We want to help you on this day-trading journey.
We sell affordable customized indicators for NinjaTrader 8 for both retail and professional day traders. Contact us to learn more about this.