7 Day Trading Tips in 2024 (Guide)

If you’re just getting started on day trading, here are some key information you may want to consider before embarking on your trading journey.

Key Points

• Before day trading, conduct thorough research including fundamental analysis, understanding market movers, and choosing the right assets, starting with small investments and only risking what you can afford to lose.
• Select a trading platform that offers rapid execution, minimal fees, and pick highly liquid assets to ensure quick entry and exit from the market.
• Always close positions before the end of trading hours, utilise stop-loss orders to manage risks, and maintain emotional discipline to stick to your trading plan.

1. Conduct Sufficient Research

Research is an essential skill for a trader, and there are three key components as follows.

Fundamental Analysis

Understanding market fundamentals is crucial before starting out as a day trader. Knowing what makes the markets move may help generate trade ideas and find opportunities to take advantage of^[1].

For example, Federal bank (FED) announcements can impact the market It will be good to look out for an increase in federal interest rates, news on company earnings, mergers, acquisitions, and other news that may affect any assets you are trading.

Technical Analysis

As a day trader, learning how to read charts and using technical analysis could be beneficial to time the entry and exit points of your trade^[2].

Depending on your technical strategy, using corresponding technical indicators may help you make better entry and exit decisions. For example, the Relative Strength Index (RSI) serves as an indicator that checks for a stock’s health^[3].

Assets to Trade

Before trading any instrument or asset in the securities markets, you may want to consider if you’ve done your due diligence. Understand the ins and outs of each asset, what makes them move, and how you can make better decisions in your trades.

Take CFDs, for example. You may need to gain in-depth understanding of how margin, leverage, and fees work, before exploring the possibility of trading them, to seize opportunities in both rising and falling markets.

2. Have Sufficient Capital

Before getting into any trade, having sufficient capital is important as you do not risk getting a margin call. Here are three considerations for you:

Start Small

There’s no shame in starting small, especially if you’re still new to day trading andl if you have little trading experience. Instead, you may want to consider spreading out your risk by diversifying across at least two or three assets, positions, and time horizons^[4].

Trade Only What You Can Afford to Lose

Studies show that 70-90% of day traders lose money when they first start out trading. You may consider limiting your capital to only what you can afford to lose ^[5].

Fees

Trading on broker platforms will incur fees which include spreads, commissions, and other unique trading fees. If you have access to sufficient capital, you’ll pay these fees and gain quick access to the markets.

3. Choose the Right Platform

As a day trader, picking the right platform is as important as researching well. Find a platform that allows you to make quick decisions, and execute these decisions accurately and instantly with minimal fees.

Since most of your decisions are time-sensitive, you may consider opting for a broker and platform that support quick trade executions. You’ll likely be able to access favourable market prices when entering positions and may be able to secure your earnings from slippage in your exit.

Although fees are inevitable, selecting a broker that charges fair rates gives you an edge on trading cost. High cost may affect your balance.

4. Pick Assets with High Liquidity

When day trading, you buy and sell securities only within the day’s market period. For this reason, you may consider only trading in markets that you can enter or exit as fast as possible. You may also like to opt for liquid markets so that you can dispose of them whenever the need arises^[6].

Learn how to identify market trends and seize opportunities from it. Also, checking the trading volume of an asset and track its median volumes before trading it can be a useful practice. Assets with low volatility may leave you with exit orders that fail to execute. Intraday trades that don’t execute within the trading period are delivery trades.

Essentially, a delivery trade is much like a swing trade. Although you’re trading the stock short-term, your position lasts for longer than one day. Day trading and swing trading are two different approaches. Strategies for day trading wouldn’t work for swing trades and vice versa^[7].

5. Don’t Leave Open Positions After Trading Hours

As someone that does day trading, you may trade securities within the opening and closing of the markets of each trading day. You may want to consider closing all your open positions on or before the end of the day trading period ^[8].

Leaving your positions overnight as an intraday trader may expose you to potential risks and losses that may incur after the market closes.

Let’s say you left an open position for ABZ company stock. The company gets involved in an unethical scandal and its stock price plummets overnight. Your failure to exit that position during the end of your trading day could possibly cause you a massive loss.

6. Use Stop-loss Orders

No matter how optimistic you are about the position you’ll take in a trade, it is ideal to always set up a stop-loss order. As a day trader, you must be prepared of the loss you’re potentially willing to accept if your decision goes wrong^[9].

Stop-loss order is a risk management tool. It can reduce the loss you can suffer within any given period. If you trade without stop-loss orders, you are likely to be exposed to much bigger losses when trades go wrong, and in some cases, your losses may exceed your invested capital.

7. Manage Your Emotions

Learn how to control your emotions when trading is valuable. Stick to your set targets and avoid getting carried away by the upward trend of signals of the stock you’re following.

Final Thoughts

Knowledge is power. You could consider equipping yourself with solid understanding of the markets and financial instruments before diving into day trading, otherwise it’d be like skydiving without a parachute.

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References