How to Increase Your Success When Day Trading

It is not uncommon to believe that institutional-level investors are averse to typical day trading positions. Although this may be correct to an extent, we need to remember that these very same individuals could still require a touch of liquidity on occasion. This is the reason why they may choose to enter into one or more short-term trades.

This will be referred to as “day trading” for the sake of our article, as the suggestions outlined below are just as relevant for novices who might have only recently become involved with the investment community. Let us examine some useful tips before highlighting mistakes to avoid.

Become Familiar with Moving Averages

Moving averages are simply another way of illustrating the trends associated with a specific asset or position. While this principle is rather straightforward, another tool known as an “MACD” should also be considered. What is MACD in trading, and what does this analysis signify?

MACD is an acronym for moving average convergence/divergence. This method is employed to better understand how two moving averages associated with a single asset are related to one another. The goal here is to predict when positions could be overbought or oversold; illustrating potential entry and exit points.

A Combination of Liquidity and Stability

Portfolio diversification is equally important when discussing the best ways to begin day trading. It can be tempting for some novices to focus on a single asset (such as a commodity or a blue-chip stock). The problem here involves a lack of stability in the event that bearish conditions emerge. It is much wiser to develop a well-balanced portfolio that contains both short- and long-term positions. Here is an example:

• Futures
• ETFs
• Commodities and stocks
• Forex pairs
• Cryptocurrency holdings

We can see that the last two classes (FX and cryptocurrencies) are more liquid than standard stocks and commodities. The intention is to offset any short-term losses with possible gains associated with more stable (and predictable) positions.

Choose the Right Investment Platform

Any successful trader is backed up by an equally efficient investment platform. These online portals will provide the edge required to remain one step ahead of what is often an unpredictable ecosystem. The best also offer dedicated account support specialists and wealth managers; helping traders to keep abreast of the latest movements. Some of the hallmarks of a quality service provider include:

• Full compatibility with Android and iOS devices.
• Intuitive charting tools.
• Access to social trading signals.
• Different pricing packages to select.
• Comparatively low commissions and fees.
• A solid online reputation.
• The ability to choose from a host of underlying assets.

As a general rule of thumb, it is normally best to partner with well-known firms that boast extensive track records. This is important in terms of transparency, compliance, and overall reliability.

Know When to Say When

One of the most practical day trading tips is associated with psychology. It has been said that greed and fear are the two emotions which govern the financial marketplace. Excessive levels of either can have a dramatic impact on an existing portfolio. Having said this, there is little doubt that losses can (and will) occur. Those who begin to feel anxious, stressed, distracted, or frustrated should know when it is best to step away for a short period of time. It will then be possible to return once a more balanced perspective has been obtained.

Mistakes to Avoid

Day trading has always been associated with an appreciable level of risk; especially when discussing short-term positions. While it is impossible to remove volatility from the equation, there are still some tips that can mitigate the overall effect. Here are some useful suggestions:

• Avoid penny stocks (pink sheet stocks) at all costs.
• Do not allow emotion to govern your decisions.
• Never exceed your predetermined investment limits; regardless of how attractive a position may appear.
• Never set unrealistic trading goals.
• Do not rely on word of mouth when entering or exiting a position.

Similar to any type of investment strategy, day trading involves a learning curve. Those who are prepared to put in the work, and who accept the fact that risk-free positions do not exist, are more likely to enjoy long-term success. Do not hesitate to refer to this article for guidance when needed.