Investing in the stock market is a great way to put your money to work. By investing in short-term stocks, it’s possible to make a profit every day. Here are a few ways you can improve your odds as a day trader.
Make Sure You Meet the Capital Requirements
First of all, you must maintain a large enough balance in your account to avoid regulations. Most of the time, if you’re a day trader, you’ll qualify as a pattern trader. Because of that, the SEC limits how often you can trade.
When someone makes more than 6 trades in a month, it puts them under scrutiny. After reviewing your account, the SEC may put limits on how often you can trade. But, as long as you maintain a balance over $25,000, the limits won’t apply. So, try to make sure there’s always at least that much in there. Otherwise, you could find out the trade you’d like to make isn’t possible.
Take a Course on Swing Trading
Day traders have several strategies they use while making trades. Typically, you’ll see most of them using something called swing trading.
As a strategy, swing trading focuses on short-term market movements over everything else. If a stock has bullish momentum, then it would be a strong buy. Prior to entering positions, it’s important to have an exit point. That way, once you’ve hit it, you won’t hesitate to sell.
We’ve seen a ton of success using swing trading strategies, too. Try and use the moving average as the main indicator while doing this, though. Once the short-term average jumps above the long-term one, it’s time to buy.
Use Some Trend Trading Tactics
Trend trading tactics tend to perform better over longer spans than swing trading. So, if you’re limited on time, trend trading could be better. You have to examine how the market is moving each day.
If it has bullish momentum, you should buy some of it. Similar to swing trading, having an exit point is crucial. See if you can establish one before buying anything at all. That’s going to prevent losses because you’ve held too long.
Upgrade Your Computer Hardware
Trading computers use powerful hardware to ensure consistent performance. As a result, traders usually perform better once they’ve upgraded their computers. When using old ones, lag can become too problematic to continue trading. By upgrading hardware, there won’t be any technical issues preventing trades. So, once you’ve found a winning pick, buying it doesn’t take long at all.
Also, we’d recommend grabbing more than one monitor if you’re at home. Using multiple can make it much easier to keep an eye on everything. Instead of switching between tabs, just pull them all up at once. Put one page on your main screen and put the rest on another.
Utilize Leverage Intelligently
Leverage has a mixed reputation among investors, dividing the crowd. For some investors, leverage represents the easiest path to massive profit. However, at the same time, leverage can be the riskiest thing out there. When using leverage, the potential profit becomes much larger.
But, your losses also increase by just as much. So, it’s essential to use it wisely if you’re planning on using it. If not, you could end up owing money to the brokerage. With leveraged trades, investors can lose more than they’ve invested in some instances.
Don’t Forget About Stop Losses
To prevent excessive losses, make sure to set stop losses. It’ll trigger when an asset’s price falls to a predetermined level. At that point, your portfolio would send a market sell order, liquidating the position. So, if one of your investments is falling fast, you won’t lose everything. Whatever you’ve made from the stop loss would be sent to your account.
Day traders are a special breed of investors, seeking limitless profit. If you’d like to start day trading, build a knowledge base first. That’s going to make a huge difference once you’re investing by yourself. Plus, anything you’ve learned will be useful anywhere there are investments. Putting in a little effort to learn how it all works will pay off in the long run.