So You Want to Day Trade and Make Thousands of Dollars? Beware!

So You Want to Day Trade and Make Thousands of Dollars? Beware!

You’re gonna lose money, bro!

Randomguru

Day Trading Is an Acquired Skill Set

Anyone can learn day trading (or intraday trading). But, from my experience you can lose money fast. And so it takes the kind of fortitude––speed, yet patience––to get in and out of a trade with a certain measure of success.

Day Trading is simply the process of buying and selling a stock within the timeframe of a single day, or trading session. And from there, you can set all sorts of rules or strategies… you could buy/sell a stock within 10 minutes, after the stock has gone up 20 cents or more per share.

I don’t wish to reinvent the wheel, so more about day trading can be found here: Day Trading: An Introduction

What You Need…

1. Trading Software

In order to successfully day trade you will need trading software with the ability to allow you to make trades quickly and efficiently.

You will need to learn this trading software so a certain amount of time must be dedicated to learning how to use the trading software and even customize it to your specific needs… what those are? It’s entirely up to you. Each person is different so you’ll have to find out what works best for you and customize this ‘trading platform’ so that you are fast and efficient.

2. High Speed Connection

Ideally, you will need a fast broadband connection. The fastest you can afford. Too many times do I hear about a trader who complains about how slow their trading software is… chances are it’s the internet connection. The faster the better. And a 1 gig broadband connection is ideal.

3. Multi-Gig Router

Yes, you should also get a fast router. Ideally, you should connect to this router through ethernet cable, but if you WIFI-enabled router is fast enough you can go wireless. I have my WIFI router upstairs and my trading station downstairs and that’s fine. Just make sure the WIFI is fast enough.

4. The Mindset

You will need to develop your mind to day trade without getting emotional and getting stressed out about it. You will need to develop mental fortitude and clarity of mind.

You have to be prepared to lose money, and depending on how much you trade, prepare to lose hundreds and thousands of dollars, depending on how much you risk.

My advice is to be consistent. Below is a spreadsheet that I use to enter a stock’s price, how many shares I will invest and what will be the gains and loses at various price levels.

As an example. If you buy 1,000 shares of a stock at $20 a share, if the stock goes up 50 cents you will gain $500 profit… if the stock goes down 25 cents, then you will have lost $250.

Risk Management

It’s up to you to make up your own rules.

If you want to make at least $100 to $150 a day, you want the stock to go up in price by 10 to 15 cents a share, then quickly get out. This is doable, providing you understand technical analysis, charting and indicators (more on these later) and see trading signals to determine entry points and exit points,

It’s best to set entry points and exit points before even getting into a trade.

Only 5 Percent…

They say that only 5 percent of day traders are actually successful in day trading. That might be true. In day trading you’re buying and selling in real time, and once you’ve entered a position your goal is to determine a good exit point. If the stock goes down, you have to decided whether to take a loss or hold long until the price goes up. I have held onto a losing position for a month before it went back up and I made a profit, so there is a certain amount of improvisation and changing of plans, should a stock go south.

It’s actually much easier to buy-and-hold and forget about the stock, once you have studied a stocks fundamentals and/or technicals to the point where you have determined the stock is a worthy investment.

More on this later…

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randomguru

Portfolio Manager & Musician

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