Day trading is a new trend that is sweeping across the globe. And, of course, the buzz is justified since you can make a significant amount of profits in a short period.
Do you also dream of being a successful day trader like those you admire?
But wait, you must be cautious before starting. Since it needs extensive trading knowledge; else, it may result in the worst nightmare.
So, let’s find out how to get started in day trading. And how to make money by day trading?
How Traders Make Money By Day Trading?
As the name implies, day trading involves entering and exiting positions within the same day. Before selling the positions, day traders hold them for several seconds, minutes, or even hours.
Typically, day traders focus on futures, currencies, commodities, stocks, or options. Their objective is to make profits on short-term price changes. Using leverage is another strategy day traders can employ to increase profits.
Theoretical Example: Day Trading Strategy in Action
Consider a day trade, for instance, where the maximum risk is $0.05, and the reward is $0.07, resulting in a 1-to-1.5 risk/reward ratio. A trader with $50,000 determines that $500 is the maximum risk they would accept on any given deal.
As a result, 7,500 shares ($500/$0.05) on each trade would keep the risk within the $500 limit (commission not included).
Here’s how such a trading strategy might work:
70 trades are profitable: 70 × $0.07 × 7,500 shares = $36,750.
50 trades are losers: 50 × $0.05 × 7,500 shares = $18,750.
The gross profit is $36,750 – $18,750 = $18,000.
Day Trader’s Career: Potential Earnings And Longevity
Although profits and a career in day trading are not stable, they will fluctuate depending on decisions, investments, strategy, time, and other aspects of the deals. However, having a thorough understanding of day trading strategies will be advantageous.
To become a successful Day Trader, education, significant post-trade analysis, and undergoing an organized trade practice program are essential.
Is Day Trading Profitable?
The most common question every beginner, as well as intermediate trader, always wants to figure out “how profitable is day trading”?
It is more accurate to state that it is profitable primarily for people aware of market trends and fluctuations. Day trading may be extremely profitable with the right approach and knowledge.
How Do You Day Trade With A Profit?
Staying focused, attentive, and putting your emotions aside are the keys to effective day trading. The following are the most important requirements a day trader needs to be profitable:
A trading plan – A trading strategy consists of entry and exit positions, capital percentages per deal, risk management, and much more.
Market insight and knowledge – It is critical to acquire the market understanding to be effective at intraday trading using indicators and other tools.
Risk management – It is critical to have effective risk management techniques and procedures in place to safeguard your funds.
How to Get Started in Day Trading?
Follow the below steps to start and execute day trading:
- Get proper training by joining effective day trading programs.
- Open a brokerage account and add funds to it.
- Have a written trading strategy that you can review every day.
- Start making your watchlist in the morning.
- Devise a course of action and then stick to it.
Analyze markets with indicators and then invest.
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