The play of the market forces coupled with the lockdown effects in the past one and a half years has attracted many individual investors and day traders. While it is a great way to generate a passive and even an active source of income, it is advisable to dive into this world with adequate education and understanding. New traders need to educate themselves on the markets, the trading techniques, the platform they will be using, and the risk management tools available. Practicing within a demo environment diligently applying the concept which has been learnt via quality education is a great way to help mitigate risks and miscalculations from early on. Here are some tips for new day traders to help them start on the right foot.
One needs to start before the market even opens. Keep checking the news, economic calendar and try to determine the possible market movers. If someone is trading stocks, for example, then they should check for any information specifically related to the industry and any potential market mover specific to stocks. This can be anything from the possible announcement of corporate actions to dividend announcement to stock splits and many other business and financial announcements that can affect the value of stocks they’re trading in or wish to trade in.
This is way more important than one might think and should not be taken lightly. Day traders need to make most of their day, which can only happen when one makes a viable plan and sticks to it day after day. Remember that all the positions should be closed by EOD. So, work backwards with time and allocate it according to the end goal you’d want to achieve at the end of the trading day.
Mitigate Risks, Meticulously
It is absolutely crucial to always keep one’s risk under control, both in terms of money management and position sizing. The latter is often overlooked and ends up being a factor behind things spiraling out of control. Day traders often ignore this critical piece of advice – one needs to decide their single trade and overall account loss in advance and trade accordingly by sizing in relation to the specific instrument to trade, its key price levels and its volatility.
Impulsive trading can often lead to trouble, sooner or later. Leverage can amplify opportunities exponentially but needs to be used very wisely, as it can increase risks just as well. Day traders must remember to only open positions when all the conditions set out by their initial plan are met. If this is not the case, do not trade. The market will always provide other, better fitting trading opportunities.
Top Tip: Accept Losses.
A professional trader is one who can learn to manage their losses properly. Gains often follow as a consequence of that. Contrary to popular belief, if one wishes to continue trading successfully, it doesn’t really matter how many times their trades end up in a gain. What matters much more than that, and is also capable of fueling more gains, is how much (how little) one loses when their trade does end up in a loss as opposed to how much one gains when the trade is a winner. The win/loss ratio should be at least 2:1. Study the probabilities to gauge better and maximize profits on the winning trades. Do not be in denial during losses; accept them and move on. Impulsive reclamation without factoring in anything else may lead to irrecoverable losses.
New traders need to work on a building a critical skill set: master the right psychological attitude, which is where really many fail. Getting the right education can definitely give one an edge in the market, but nobody is ever 100% accurate as the market is constantly changing. At Axiory, we are firm believers of proper trader education, and provide a wide range of educational contents, regular webinars, to our traders as well as a demo trading environment which is exactly as the live one. One piece of advice: trade your demo as it was real money. This will help in introducing a critical skill set.
Lastly, try and refrain from any messages or offers claiming unrealistic performances because that’s just not possible; Day traders should focus on becoming the master of their trading faith by adequately managing their positions to come out on top, day after day.