Day trading pertains to positions in the market, which are kept for a short term, specifically when a trader opens and closes his or her ground in the same day.
In the 1990s, the scheme obtained a bad image when many neophytes started a day trade, considering new online trading solutions without utilizing strategies that are tested by experts. The beginners deemed they could earn money from home in stock trading via the interest minus the extra effort and knowledge.
However, working in your pajamas may not be the road to success all the time. You still have to learn a lot if you want to move based on rules and techniques.
To enter the trade smartly, you should look for situations where there is an imbalance in supply and demand. If supply is being exceeded by demand, the price would likely soar higher.
Nonetheless, if there is surplus supply but no interested buyers, the price would drop. You have to learn how to specify price chart’s turning points and study related historical instances.
Set price goals.
You need to decide how much returns you are willing to accept, specifically if you are about to purchase a long position. Besides your profit level, you should also determine how much loss you could resist.
Afterward, you should stick by your upper and lower limits. However, be reminded that you may specify new loss and profit goals in a bullish market once your initial target was reached.
Understand a proper reward-risk ratio.
You have to focus on losing small and winning big. Consider a ratio of at least 3:1. You may increase this to 5:1 or higher once you gain some experience in trading the market.
Never forget planning.
It is better to execute a trading strategy after planning occasionally than exchanging securities without a further forecast of what could happen. You have to be patient in waiting for opportunities that could provide you higher profits. If you do not have to trade in a day, it is better than to simply do something for the entire session.
You should also accept the fact a senior instructor would help you be successful in the stock market. Impulsive behavior is often encountered if you have no guidance. It is best to find someone who could provide you tips, guidelines, and recommendations so you could set a trading plan to stick by.
Once you have established your day trading technique while complying with the given tips, you could protect yourself from getting it wrong most of the time – losing more than gaining.
Have you been day trading in the Philippine Stock Exchange? What disciplines, rules, or techniques would you like to add to the list? Please comment below.
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