Day Trading Tips
If you are interested in learning how to day trade the financial markets then this article outlines some things to think of before starting.
Table of Contents
7 Tips for Day Trading
Below are seven tips for day trading the financial markets and how to access tools and resources to support you in mastering each one:
- Have realistic expectations
- Create a trading plan
- Choose the right market
- Choose the right broker
- Invest in your education
- Build the right mindset
- Exercise proper risk management
Let's dive into each one of these in more detail.
1. Have realistic expectations
While day trading the world’s financial markets may be glamorised on social media it is notoriously difficult to do successfully. There are many factors which influence the price movement of a market. Having the ability to process all the right information at the right time and beat the fast-timeframe algorithmic traders can be a challenge.
It is important to have realistic expectations from the outset to avoid making poor, emotionally-charged decisions. It is best to treat day trading as a skill set which will take years to master. After all, the world’s top day traders at proprietary trading firms have trained themselves for years to master the market.
Ideally, you should practice on a demo account and build a consistent track record of at least 9 months before day trading with real money.
2. Create a trading plan
Once you have the right expectations of day trading the market the next thing to do is to create a plan on how to build the skill set and knowledge in day trading the financial market.
Your day trading plan should entail what markets you will trade on, what time you will trade and what specific parameters need to be met in order for you to take a trade.
This should then be thoroughly back-tested to understand more about the limits of your chosen system preparing you for the inevitable drawdown and string of losing trades.
Having a plan from the outset can help to control emotions and build focus. That focus over many years may give you an edge as a day trader.
3. Choose the right market
While you can day trade stocks, commodities, indices and forex it is best to have a core focus on one asset class, to begin with. This is because every asset class moves very differently and exhibits different characteristics of price movement.
Day trading forex is open 24 hours a day, 5 days a week. It is the world’s largest market which means it is very liquid enabling day traders to buy and sell instantly.
Day trading the stock market is also possible. Some traders may actually be more familiar with certain companies which can help in their decision-making. You can day trade both asset classes on a demo trading account first to see what will work for you.
4. Choose the right broker
As day traders attempt to try and profit from short-term movements in the market, choosing a broker with competitive commissions and spreads is important. Be sure to look for safety and reliability as well and always make sure you trade with a regulated broker.
For example, the Admirals Group have entities which are authorised and regulated by the UK Financial Conduct Authority (FCA), the Cyprus Securities and Exchange Commission (CySEC), the Jordan Securities Commission (JSC) and many others.
On top of this, Admirals provides a range of additional client fund security features depending on your geographical region.
For example, clients who open an account with Admiral Markets UK Ltd which is authorised and regulated by the FCA can access the following account types (*which can change over time):
5. Invest in your education
In order to day trade the financial markets your understanding of how the market works is essential. More importantly, education is necessary to identify the tools, patterns, indicators or types of analysis you will use in order to make consistent and objective decisions.
In the Admirals Education articles section you can access a range of articles and tutorials covering the following categories:
- Forex Basics – learn the basics of forex trading
- Forex Analysis – learn about different analysis techniques such as technical analysis and fundamental analysis
- Forex Strategy – understand the concepts behind a trading strategy and how to create one
- Forex Indicators – discover some of the most well-known technical trading indicators and how to use them
- Trading Psychology – sharpen your most important tool which is your mindset
- Trading Software – explore the different trading platforms available and how to use them
- Automated Trading – discover how algorithmic trading works
- Stocks and Shares – learn how to trade and invest in global stocks
You can also register for your free spot on the Admirals Forex 101 Trading Course below:
6. Build the right mindset
Day trading in the financial markets is all about emotional control. Most individuals who start trading the market have not built the right mindset to deal with losing trades and getting things wrong.
However, trading the financial markets is all about probable outcomes. You will lose and you will get it wrong. If these emotions get the better of you, then you can lose all objectivity, start trading what you think will happen and then wipe out your trading account.
One way to help you maintain the right mindset is to surround yourselves with other traders who have more experience than you. While you can never avoid losing trades, hearing from other traders can help you manage the experience better.
You can do this by tuning in to the Admirals live trading webinar series where experienced traders share their knowledge with you.
Above is a screenshot of the webinar page at the time of writing. You can register for your free spot below.
7. Exercise proper risk management
Trading is all about winning and losing. It is important to exercise proper risk management so that a few losing trades does not wipe out your whole trading account.
You should always use stop losses and know how much you could potentially lose on a trade if you are wrong – which will happen! It’s ideal to start with a demo account which allows you to practice in a virtual environment. Once you have built a consistent track record start with very low-risk capital and build from there.
It is important to learn how to exercise risk management in all types of market situations – high volatility and low volatility. This can only be done with time so be sure to manage your expectations from the outset.
Tips for Day Trading Summary
Day trading in the financial market is probably the most challenging of all the trading strategies and styles available to traders. Following the tips above will help to ensure you have realistic expectations, give yourself time to build the right skill set, and exercise proper risk management to help identify if day trading is right for you.
FAQs on Day Trading
Is day trading good for beginners?
Day trading is more suitable for advanced traders. Trying to profit from short-term movements in the market is challenging even for professional traders. Beginners should start slowly, with a long-term plan on building the right skills, knowledge and mindset and ideally on a demo trading account.
What do I need to start day trading?
To start day trading you need a regulated broker, a trading platform, a trading plan and a strategy. Perhaps more importantly, the right mindset and expectations are needed as day trading involves both winning and losing.
Other articles you may find interesting:
- How to Trade with MetaTrader WebTrader
- How to Start Forex Trading Guide 2023
- Forex Market Hours and Trading Sessions
Admirals is a multi-award winning, globally regulated Forex and CFD broker, offering trading on over 8,000 financial instruments via the world's most popular trading platforms: MetaTrader 4 and MetaTrader 5. Start trading today!
This material does not contain and should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments. Please note that such trading analysis is not a reliable indicator for any current or future performance, as circumstances may change over time. Before making any investment decisions, you should seek advice from independent financial advisors to ensure you understand the risks.