Day trading strategies: the beginner’s guide for 2020. How to Develop the Right Money Management Mindset to Generate a Passive Income and Day Trade for a Living

By George Graham

EVERY MARKET GROOVE, EVERY GAIN THROUGH YOU. Are you searching for your gateway to financial independence? Dive into the art of Day Trading and harness strategies that many often overlook. How frequently have you heard friends or acquaintances discuss their investments? Perhaps they boasted about a luxury purchase, like a BMW, all due to their trading profits. Have you wondered how they achieved that? You might have thought, "Trading is not for me." Maybe you just lacked the proper tools until now. In this guide, written clearly and engagingly, you will uncover the intricacies of Day Trading and learn to operate as a seasoned professional. Cultivate the appropriate mindset, manage your money wisely, plan successful trades, and avoid common pitfalls. Discover foolproof trading strategies and understand how passive income can set you on the path to early retirement. While Day Trading may not suit everyone, becoming familiar with the system makes spotting and seizing opportunities almost instinctive. Diversify your investments, augment your income, and establish a secure future for yourself. Are you ready to build your empire? Order your copy today and prepare to immerse yourself in the world of investments.

• Language: English
• Publisher: Youcanprint
• Release date: Jan 15, 2024
• ISBN: 9791222724751

Book preview

Introduction

If you have chosen to buy this book, you may already have been intrigued by the exciting personal and financial rewards that day trading possesses. If you are interested in day trading, you might have heard about the amazing and fascinating tales of some big monetary benefits that day trading has brought for some investors or you might simply want to change your daily routine by switching it from an active job to working from home. 

The following chapters will discuss some of the basics of day trading. Not only will you find all the information you will need to successfully get started as a day trader, but you will also find five success stories.

Day trading isn’t for everybody. It takes a person with the right mindset to become successful. Through this book, you will be able to learn if you are that type of person.

Trading in the financial markets has caught the eye of several people across the globe. This has led to an increase in the need to know how the market works. The most common reason people have joined trading is to create revenue by making profits. 

Day trading involves buying financial instruments and later selling them at a higher price to make profits. People engaging in day trading usually engage in two forms of trade. These forms of the trade include long trade and short trade. 

The process of trading encompasses risk management and trading psychology. There are several ways a trader can avoid or minimize risks through the trade process. He or she is advised to study market psychology and be calm and accurate when making decisions. 

The key to master the art of day trading is maintaining knowledge and discipline. When you are sitting in front of your trading computer screen with your finger on the trigger, you are about to make decisions in split seconds. Your decisions can help you rake in thousands of dollars while at the same time, it can strip you of thousands of dollars. 

ISBN 978-1-4467-3055-3

Chapter 1: The Basic Concepts of Day Trading

New York Times newspaper

What Is Day Trading?

Day trading refers to the transactions that are performed by traders on financial securities within a restricted period of a single trading day. Simply put, it is the buying and selling of different types of securities in a short and limited time frame. It is pertinent to mention here that day trading is not limited to stocks only, and it encompasses futures and currencies as well. The basic point to keep in mind is that day trading spans over a single day. You cannot roll over the open trade positions overnight to the next day. There was a time once when the only people who could actively take part in trade were the ones who belonged to large financial institutions, trading houses, and brokerages. However, things have considerably changed since the advent of the internet. Now there are online trading houses and brokers that have made it possible for an average investor to actively trade.

Day trading is done on different platforms and systems, and the operator must be familiar with the trade. This should not scare you. To find out how it does not work in all cases, you need to be a computer expert and to study the basic movements and technological developments over time. 

Losses in the business market are expected and most traders lose daily transactions. It is also essential to focus and ration for a period of losses and to not forget the fundamental fact that money will sometimes be lost. Focus on the future activities of daily transactions by implementing some of the strategies outlined in the grand scheme. 

Independence is to build your own set of tools. To do this read books, watch every video, interact with a mentor. If the books have another point of confusion in your area then study more. Always grasp the basics after a thorough study. But when you feel lost, do not hesitate to get help. More importantly, the listen to your teacher and analyze the success of movements that are part of his grand plan. 

Good things take time. In a strategic move, think twice, but it should not cause paranoia. Act, by many areas to reduce the number of losses in various activities of daily transactions. 

Also, it takes patience to learn to be a day trader. Day trading will not be accessible at first, but over time, which will be equipped with a lot of skills and experience.

Getting stuck in the past has made many prisoners. Seeing the possible future moves are considered the requirements of a day trader. This implies clear mental thinking about their next possible moves after careful consideration.

A day trader does not need have to be rich initially, but they must have a specific amount of money that has been specially selected to start the trading day. Remember, the first days are always a win or a loss situation as you continue to learn and grow. This particular set of money can be lost as well. Be careful when handling your finances in day trading. Not every story is a good story. 

High interest in something is the objective to be successful. This gives the desire to learn and master what day trading is all about and is the sign of a future entrepreneur. 

Day trading is a lucrative career if you understand its basics and execute it properly. It is a fact that it can be a little challenging for the people who are new to it and are not well-prepared or they don’t have a well-planned strategy to win the game. The key is to understand the fact that even seasoned day traders can certainly hit some rough patches in business and experience painful losses. All days are not successful days.

How Day Trading Works?

The basic thing about day trading is that it is not like an ordinary investing technique. Investing is the technique of buying a bunch of stakes in a particular asset that would build a profit for you over the long term. How long it takes varies from investment to investment, but it may span over years. Investors do in-depth research on a stock and remain greatly concerned about the crests and troughs of the stocks they are investing in. They lookout for the companies which tend to make big profits, which avoid debts, which pay them off on time if they accumulate them, which keep a powerful line of products, and which escape from litigation. 

Day traders work in a compressed window of time. Let’s assume that a day trader buys 500 shares of a stock at 9 am. After half an hour, the price for the stock begins to rise and the day trader sells the stock. If the stock has a rise in price by $0.50 per share, the day trader will bag $250 minus commission. 

Some day traders use the scalping technique which aims at making small profits by following little price changes throughout the day. Range trading is also popular among day traders as it employs support and resistance techniques to determine decisions about buying and selling. As already mentioned, there is the third technique known as news-based trading. Traders benefit from the volatility that originates due to different pieces of news. Another technique is known as high-frequency trading (HFT) in which a trader uses algorithms to exploit inefficiencies in the markets. 

Day trading is the different form of trading known as swing trading. Swing trading involves selling of financial instruments and latter buying them at a lower price. It is a form of trade that has several people have invested their time and capital in. The potential for making profits is very high. However, it is also accompanied by the high potential of making huge percentages of loss. People who are terms as high-risk takers have the potential to realize good amounts of profits or huge losses. It is because of the nature of the trade. The losses are experienced because of several variables that are always present in trading. The gains and individual experiences are brought to light by margin buying.

There as a big difference between swing trade and day trade. The difference hails from their definitions, it goes a mile ahead to time spent in and risks involved in both forms of trade. Day trade has lower risk involvement, but one has to spend more of his or her time, unlike swing trade. Day traders are prone to participating in two forms of trade which are long trades or short trades. Long trade involves an individual purchasing the financial instruments and selling them after them increasing in value. On the other hand, short trade involves selling financial instruments and later purchasing them after their prices have dropped. 

The trading market has undergone through several advancements. The major change was witnessed during the deregulation process. There was the creation of electronic financial markets during this period. One of the major innovations was the high-frequency trading index. It uses heavy algorithms to enable huge financial firms in stock trading to perform numerous orders in seconds. It is advantageous because it can also predict market trends.

The process of day trading has several challenges. An individual is supposed to be able to make a good decision during two important moments. The first moment is during a good streak and the other is during moments an individual has a poor run. At this point risk management and trading, psychology comes in handy to help an individual in the trade. One is not supposed to panic or make hasty decisions during these moments. An individual needs to have an effective watchlist. A good watchlist built by a trader is supposed to be able to understand the modern trading markets. This is made possible when it features stocks in play, float and market capital, pre-market grippers, real-time intraday scans, and planning trade based on scanners. The success of day trading is also incumbent on effective strategies.

Overview of Day Trading

Before you start trading, look around the market and make your plan on which combination of currencies will you trade. This depends on the volatility of their exchange prices, which is based on previous research done on the past profitable exchanges. Planning also includes the time that you are willing to sit down and monitor the trades, make sure that you stick to the time scheduled to avoid messing up the already earned profit. Remember that choosing the time to trade should be at a time when the market is more active. The market will be there tomorrow and, therefore, when your scheduled time closes your trades. Strategy to be used throughout the time you are trading should also be thought out before you start trading, and it should be adhered to throughout the trading period in the day. 

When day trading, you have to know how to manage your money because at the end of the day you want to have money, not lose money. During the day, you will take part in several trades, and therefore you need to know the amount of money you will use to invest. You have to prepare for losses and gains, but the total loss you expect is of importance to avoid losing all your money at the end of the day. This starts by knowing the risk per trade; this is the amount of money you are ready to lose on one trade. If you are a beginner, it is good to set your risk at a maximum of 2%. The size of the account should also be taken into account. If you have a trade that according to you, has a stop-loss of close to 50 pips, if you risk $200, your risk will be $4. This is done by dividing the amount of money you are risking by the stop loss pips.

Always have a stop target before you start trading, and also consider the type of market you are trading in; some markets are so dynamic such that your stop order might not be executed as per the set value. Therefore, to be safe, set your stops using the actual price-action and the conditions prevailing in the market, it is good to set them around the resistance, and support levels, chart patterns, trend lines, and how volatile the currencies you are using are in the market. It is not only the stop loss position that you should consider during day trading, but also consider the point at which you want to take profits. For maximum profit, place appropriate levels of taking a profit.

Also, you should look at the reward-risk ratio, and when it is 1:1, it means that the amount you are risking equal to what you expect as a profit, and 3:1 has a triple amount to gain to lose. You can mix these such trades such that you have many with a high potential of gaining and few with an equal potential of winning. You can do it the other way around, but make sure that there is a balance that will leave you with some profit.

Although trading takes place at all times in the world, each market region has its hours of trade. Therefore, as a trader, you should know your market, and it's opening and closing hours. You should also know that trading is not good throughout a trading day, and trading is good when the market activity is high. We have four