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Daytrading And How To Get Started

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  • Daytrading And How To Get Started

    Courtesy Of Ezine Articles

    One working definition of a Day Trader is, "A person whose goal is to make his or her profits from a security in the shortest amount of time [preferably during a single day.]" Though this definition is simplified, the day-to-day job of a Day Trader is a far more complex series of events and strategies that must be learned and implemented.

    My description of daytrading has largely been based on past experiences with the markets, as well as the changes in the markets and the global economies themselves. Keep in mind; the stock market is not your friend. Much like war, in day trading and/or short-term investing, you are pitting your wits against every other person in the market. Every dollar you make is on the back of someone else's losses. Your goal is to win with your investments and your trading, and that requires someone else to lose. Try to make sure it's not you. Never forget that, and you'll be off to a much better start in the markets.

    How risky is daytrading? Well, before you read on any further, imagine taking about $10,000 in crisp, brand new one hundred dollars bills out into the backyard. Put them on the ground and douse them in lighter fluid. Then strike a match. Don't burn your money just yet, but just stand there. That's about how risky daytrading is.

    Always remember: at any given time, when you are daytrading for a living, you are risking probably that much money (if not quite a bit more), and your money is in perhaps just as much risk. While we are not suggesting that you actually set fire to your money in the backyard, our analogy is fairly accurate. If that bothers you, then perhaps you might consider another line of work, or a good mutual fund, because I don't know any good day traders that haven't seen at least $10,000 go up in a puff of smoke during market hours. It's simply unrealistic to expect to be able to trade professionally and profitably from day one. Mistakes will be made; lessons will be learned; money will be lost as you learn. It's a never-ending process to a large degree. In fact, the day you feel you have mastered the markets, that's the day you get your head handed to you.

    In the years I have traded, I have seen many people come and go. I've seen people make and lose large sums of money very quickly. I have made and lost large sums of money very quickly! I've seen stocks go from pennies to hundreds of dollars and back again, taking traders and investors for a ride in both directions. And yet, still, in all the years I have been in this business, I am sure of only one thing about the stock market--that I have not seen it all yet. If anyone claims to have all the answers about the stock market, or claims to be the only person you should listen to - run, don't walk away from them and/or their services.

    One of the most frequently asked questions is, "How much capital do I need?" It is a somewhat difficult question to answer. How much do you really need in order to start day trading? How big a "stake" (a term used to refer to your starting capital) is required to get going? The only answer is that it's different for each person, and it's something you must consider for yourself before you start. However, I personally feel, in general, you should have enough trading capital to purchase between 500 to 1000 shares of any given stock. Ideally, this would be without having to use margin.

    If you are in the habit of trading $40 to $80 stocks, this could mean you need as much as $40,000 to start. At the same time, one can trade with as little as $10,000 and get their feet wet. It also doesn't hurt to have enough capital to diversify into several different positions (two to five generally) at one time - each with say 300 to 500 shares. Just remember, if you are starting small, keep your expectations realistic. Certainly, someone trading with $10,000 to $20,000 is going to have a much more difficult time generating $1,000 per day than someone using $100,000 or more. As long as you keep this in perspective, it will help keep you grounded as you begin learning.

    When you get into the bigger leagues of day trading, then it's nice to be able to "step on" (i.e. purchase or short) a "block" or two of stock. This would be generally defined as 10,000 shares of stock. This typically is going to require $500,000 or more of trading capital, plus some use of margin in limited situations and for a limited time. When you reach this level, it's easy to see how daytrading can become quite profitable (and quite risky!). A few points (or even a few fractions) across 10,000 shares can return quite a bit of money quite rapidly. Just remember it goes both ways; you can quickly lose quite a bit as well.

    As you can see there's no right or wrong answer with regard to how much you need to start. Simply keep your objectives in perspective and reasonable. This will go a long way to giving you a good start in the markets. Also understand that if you are starting small, factoring in things such as equipment fees and transaction costs may become much more important.

    Good luck in the markets!

    No permission is needed to reproduce an unedited copy of this article as long the About The Author tag is left in tact and hot links included.

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    "Step into the arena and hold on to your hat. Don't get discouraged if you don't make 8 trillion dollars in your first month. Trading is not a get rich quick scheme. Realize that trading is a skill and just like any other skill it takes time to learn. Have convictions in your decisions in life and trading. Ignore the comments and "advice" of those that have never traded a day in their life."

    College is here to read more about the college scam!

    Good KARMA and positive energy abound.

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  • #2
    God i wanna one day be able to "step on" 10K shares of stock


    • #3
      You start day trading by start losing.

      If your capital is 100k, then just start with 10k first. No matter what, you are going to lose all in the beginning. It doesn’t matter, how many books you read, how many hours you spend on listening you tube videos/podcasts about trading. Eventually you would blow up your account, only then you would realize the importance of risk management. That’s why it is important to start with small capital. People tend to ignore this during the learning phase, as its the boring chapter.

      So don’t keep going demo trading/paper trading, just directly jump into it but start small.

      And stop watching CNBC or any other TV news channel during market hours. Its definitely not going to help you. It only increases the noise and affects your trading decisions. Other than Trading rules and Trading terminal, you really don’t need anything else on your computer screen.

      Do not look for reassurance from Twitter Traders.

      Suppose, you go long on a stock, and as soon as you place the trade, you open up Twitter or any other trading forums, and start looking for posts related to the stock you recently took trades on and you would keep searching for people who have gone long on the same stock. Just to assure your mind that you are on right track.

      Even if you come across certain posts who have gone short on your stock, you tend to ignore it. So when you see some posts similar to your trades, you kind of feel more confidence. This is utterly nonsense. Don’t do it. So do not use any of these social media accounts/forums when you are trading.

      Above all, Follow a trading system with strict discipline. That’s the holy grail in markets, just executing your trading system flawlessly is what separates professional traders from amateurs.

      An amateur trader feels GOOD after making a good trade.

      A professional trader Feels NOTHING after making a great trade.

      Following a mechanical trading systems helps you in keeping your emotions under control.