Day trading seems easy from the outside looking in, until someone tries it and realizes they’re dealing with real money. Then, things get serious and a little scary. Sometimes, it’s hard for newcomers to follow a straight path or develop a successful strategy. With the right outlook, it’s possible to overcome the days of doubt and build up investing confidence. Here are essential strategies to keep beginners headed in the right direction.
Finding a Scenario Where You Can Make Money
It seems so basic, but it’s really the foundation of everything: look for scenarios where you can exploit an imbalance of supply and demand. There’s an axiom is finance that’s often repeated and often ignored. If supply is depleted and there are able buyers, the price will go higher. If there’s a large supply and no waiting or willing buyers, price plummets. Identifying these two points or predicts periodic peaks and valleys is the key to becoming a successful day trader.
Choosing the Right Platform
Every experienced trader swears by their platform, but it’s important to find one geared to your experience level. The experts at TradeFW offer the following advice, “For those who want to learn how to trade online quickly and efficiently, there’s no better platform than with MetaTrader 4, the one we offer here at TradeFW. That’s because MetaTrader 4 maximizes your access as well as your comfort by enabling you to connect from any device – computer, smartphone or tablet using any browser you like.”
Beginners Should Set Price Targets
When betting on a long shot (long position), figure out beforehand how much profit you want and how much you’re willing to lose (stop-loss level). This is not gambling and requires discipline, so stick to that decision. This limits your losses and prevents greed from costing you a healthy margin. However, if the market is particularly strong, traders often set a more aggressive profit goal and stop-loss level above their regular targets.
The 3:1 Rule
New day traders should have a risk-reward ratio of 3:1 when they set the day’s trading targets. This lets them lose small, win big, so even if there’s a loss on a big trade, there are enough reliable “winners” in the trade targets to cover it.
Don’t Be Afraid of the Order Button
Decision paralysis is something everyone has to overcome in the face of a new experience. Novice day traders get wrapped up in staring at the parameters and hovering over the order button – afraid to lose money and even afraid to make it, in some case. If someone is patient and disciplined and sticks to their strategy, the system will work. Placing the order should come naturally, and the stops put in place protect them from major losses.