In this article, we will cover some initial day trading basics concepts for prospective day traders, including capital required to start, equipment needed, and other basic concepts for a new day trader. Day trading in the stock market involves short-term trades during the course of regular trading hours on a given day, with positions held for less than one day. The obvious overall purpose is to make profits on a day-to-day basis, avoid the urge to make emotional trades and lose money, and buy and sell stocks or options using a consistent strategy.
Some day traders are consistently active, making trades every day. Others are much more cautious and enter and exit only one position per day.
Historically, the most common day trading markets have been stocks, foreign exchange and futures. Recently, however, day trading options has become increasingly popular.
Overall, day trading can be a full-time job and career, or it can be a part-time hobby. It can be lucrative and possibly lead to financial freedom, but success mostly comes with a well-planned day trading strategy, a very good mentor to show the way, and consistent and patient application of the trading strategy.
Day Trading Basics: Educate Yourself
Anyone who wants to day trade must know that it is not a get rich quick career. Rather, a successful day trader knows that he or she must spend considerable time to learn the nuances of day trading and develop a sound trading strategy.
Unsuccessful day traders lose money frequently because they do not take the time to prepare and educate themselves; rather, they dive into the stock market with no cohesive trading plan and usually have no technical analysis of the stocks they are trading.
Generally, you should expect to spend six months to a year developing these trading skills. Equally important, you will want to spend that time practicing a well thought out day trading strategy and become comfortable with it. All of this should take place before using any of your own money in the open trading market. (There will be further discussion below on how to practice day trading before using actual money in the market.)
A successful day trader typically either has a strong background in the stock market or he or she has been able to take the necessary time to learn good day trading strategies from another person who knows a significant background in the major stock exchanges and has a developed an easy-to-use day trading strategy.
If you are the latter (someone without substantial background in the stock market), it is important to identify someone who has designed a program that provides you the necessary tools for buying and selling stocks on a day-to-day basis.
Without taking the time to educate yourself on how to become a pattern day trader, and without identifying a program or person that can help with this education, success in the markets – i.e., making consistent profits – will be much more difficult.
Most day traders work from home. Because of this, it is important to have space and proper equipment to ensure no distractions from outside sources and limit equipment failure.
The following are some simple ideas for office space utilized by many successful day traders:
- Furniture – You should invest in excellent furniture, including an office desk and chair.
- Lighting – If you live in a congested environment, invest in good lighting for your room.
- Set rules – Your trading space is your professional office. As such, set rules about who can access it at a given time. It is best not to have family, pets, friends or neighbors disturb your work environment, if at all possible.
In many cases, your trading equipment is more important than anything else. Keep the following in mind:
- Internet – A high speed and reliable internet connection is one of the most important aspects of your day trading office. Because of how fast the financial market is, you need access to the fastest internet. You also want one that is from a stable and well-known internet provider. A high-speed and stable internet will help load charts, data and news faster. It will also help ensure that critical daily trades are executed right away.
- Computer – Ideally, you will want to invest in a new computer setup. Day trading requires a large screen so that you can see all necessary data points, including charts, trading screen, news clips, and other aspects of a typical trading platform. A successful day trader utilizes trading strategies that includes broker account trading websites, and these websites are better suited using a new fast computer with a large screen.Laptops are also commonly used, but it may help to have a separate monitor so that you are not looking down at the screen; rather looking up and seeing a nice large view of your trading pages.
Day Trading Basics: Trading Platform
Once you have conducted the necessary research and have a basic understanding of how to conduct same day trades in the stock market, you will want to search for a day trading platform that suits your needs. There are several components to look for when searching for such a platform, and some of the key ones are set forth below:
Easy and Free to Download
When searching for online brokers that offer day trading services, look for a company that provides a free download of their trading software. This is fairly basic, but you should not spend money to have access to a stock brokerage trading site.
The Site Offers Important Trading Functions
A good brokerage trading account will have these basic options:
- Technical Analysis Indicators – The trading site should include an option or tab that allows you to easily find all the indicators offered by the platform. Among the popular ones are market data, Bollinger bands, market conditions, the relative strength index (RSI), the Intraday Moving Index, and others.
- Charting tools – These are tools that are helpful in day trading, especially when trading over a short period of time. A day trader can identify the daily trading opportunities with charts and drawing tools that come along with such a trading program.
- Trading options – This refers to options for buying and selling financial assets, such as stocks, options, futures, and, in some cases, cryptocurrencies.
- Assets – The software has a tab that lists the assets that are provided by the broker.
- Account Information – Your brokerage account site should also include easy access to your personal account information, including your trading balances, and information on your daily and annual losses and profits, and other key data. Practice, Practice, Practice!
The main goal of a day trader is to of course make profits and rarely lose money. The best way to obtain these consistent results is to practice.
Some of the best brokerage companies offer software that allows the day trader to use “paper money,” or fake money, while using real time market data. These demonstration mode options typically come with the main trading software. The obvious purpose of these training modes is to allow you to become comfortable trading with real time data and real time charts, but not expose your actual real money. This type of training software also helps develop confidence and consistent trading habits.
By way of example, TD Ameritrade is a good option for anyone interested in day trading. TD Ameritrade has a trading platform known as thinkorswim. It is worth downloading and looking into such a program long before you buy and sell any stocks or options with your own money.
Find a Good Mentor
Ideally, you have a good friend or a family member that you trust that has substantial experience in the stock market and, even better, has one or two successful day trading strategies.
If you do not have such a person, then it is important to identify some type of program or person that can offer day trader training at a reasonable price. This can be tricky, because there are many programs and persons out there trying to make a quick buck.
As discussed earlier in this article, the key to not losing money is to educate yourself. That also goes for finding a product or person who can help train and guide you through some of the more complicated aspects of day trading, such as reading and drawing charts, understanding the full potential of the various trading accounts available (such as thinkorswim), the risks involved with trading, market volatility, understanding a stock price, and many other issues.
So take your time, find that mentor, and rely on that mentor as you become more sophisticated in the day trading world.
Summary: Day Trading Basics
As with any new endeavor, the most important first step is to take time to educate and learn about the topic you are interested in. With day trading, you eventually will be using your own money, which means in some cases, losing money. Experienced traders take the time to learn their craft, work in a quiet environment, utilize modern equipment, and rely on the expertise of a mentor to help them develop day trading skills and buy and sell stocks or options in an unemotional and almost boring pattern. Once the educational and training part is done, you will be able to move on to start online trading with your own money and see those consistent day trading profits start to happen.
Maurice Kenny has helped over 600 people become financially free through one-on-one coaching, mentorship, and options trading strategy. Many of these new traders are now full-time traders, and they all started by watching his 1-hr webinar.
Feel free to check out other FREE educational resources to help guide you as you begin your new journey to financial freedom.
Also, download a (FREE E-BOOK) by Maurice Kenny, “DAY TRADE LIKE A MILLIONAIRE.”