Day trading on stock is considered the ultimate laptop lifestyle. However, you need to do it right in order to reap the immense benefits that it has to offer. In fact, there are people who consider this form of trading as a fully fledged career that can earn them consistent income. Therefore, it is important for beginners to understand how day trading is works so that they can make informed decisions on the subject. Below, we will look at the tips that every beginner needs to know when starting out with pattern day trading.
Do not use leverage
This is one of the biggest mistakes that newbies make when trading stocks. They get into the game, think that they are the hottest thing on the floor and before you blink, they have lost everything. The problem here is that, these traders leveraged on their stock. Therefore, it is advisable to avoid leveraging at all times. This is because, although you stand making more profit in the process, the potential for a loss still exists. And in the worst case scenario, you could end up making more losses than the money that you have in your account. The last thing you want is to receive a call from your broker asking you to deposit more money to cover the losses you suffered from leveraging. And just like in other businesses, making losses means the end of the game for you. Therefore, always remember this tip when trading.
Follow stock chart patterns
Stockstotrade.com advises that when you start trading in stocks, you should paying close attention to stock chart patterns. This is because; stocks normally follow a specific pattern which will help you in determining the best times to transact. Websites such as stockcharts.com and free stckcharts.com can come handy in teaching you about stock charts. Overtime, stock patterns do repeat themselves and as you continue to study these patterns, you will learn your play and thus, be able to identify the right time to make a move. To begin this process, you should first focus on simple charts but as you go, start understanding the complex ones - This important for it will lay the ground for you to start focusing on the more serious stocks in the market.
Create a stock portfolio
Many investors are usually intimidated by the thought of creating their own stock portfolio. This is because they are normally torn between the opportunities that investing in stock brings and the risks of getting it wrong. As a result, most of those investors give up before they start. However, things are not supposed to be that way. The level of risk in stocks that suit you determines the kind of portfolio that you are going to create. Thee good thing is that, There are some good stock portfolio plans that you can find online. Such guides can help you create portfolios that work best for your own needs.
Trade on volatile stocks
Volatility is the change of stock value over time. And as we stated above, following stock charts enables one to follow stock prices and values as they fluctuate over time. On the other hand, high volatility is a situation where stock values moves up and down at high rates. Therefore, it is important to note that when there is no volatility, you cannot make a profit when trading on stock. If you plan to do day trading as a means of generating income, you got to embrace stock volatility. This Volatility can also apply for long term investors as they still need to sell their stocks at some point in time. Without factors such as volatility and stock volume, it would be very hard to sell your stock.
Respect mental stops
Mental stop is the next factor to consider when doing day trading. And Unlike physical stops, you do not need to put stops on your trading software when it comes to mental stops. To find the right time to stop, it is important to focus on a risk-reward ratio. You should target keeping your risk-reward ratio at between 3:1 and 4:1. Anything beyond or below such ratios will not be worth your time. However, you can still take advantage of liquid penny stocks when trading on day stock.
Never quit learning
Every stock trade that you make is a lesson that you should learn. Whether you win or lose, you should take every opportunity to learn something new about stocks. Therefore, if you are looking to lead a laptop lifestyle, you’ve got to study very hard. The best place to learn about stock trading is on your portfolio. This is especially when you lose money on the trade. You need to note both the signals and mistakes that you made in the course of trading. With that, you will be in a position to make better decisions in the future. Similarly, when you make a win, look at the stock patterns that appeared before you made the sale, and if you spot such trends in the future, prepare to sell again. Day trading is a matter of both learning and perfecting your decisions.
