Day trading is as exciting as it is unforgiving. Look no further than the millisecond-early release of Fed news that resulted in big bets by futures traders and you’ll understand just how fast the market moves. But futures traders at least have the luxury of long-term developments when making deals; day traders must be ready to react on a moment’s notice, with poignant market insight, and do so in a way that yields profit. No small task for even the savviest among us.
Day traders must possess particular skills and tools in order to accomplish this lofty goal. Equipment, experience, strategy, and standing capital can all help day trades and swing trades bear fruit. Considering the potential for loss and the sophistication of the financial market, successful Wall Street tycoons would do well to leverage any conceivable advantage to end the day in the black.
1. Trading Platform
With the digitization of, well, everything, stock trading has become an almost entirely online endeavor. Day traders will need sophisticated, versatile, and bug-free software in order to analyze, discern, and complete trades on the fast moving market. Many such platforms exist, some allowing traders to eschew brokerage services (and fees) in order to cut their own path at appreciable savings.
2. Multiple Monitors
Computer hardware has reached unforeseen levels. The good news for day traders is that this graphic and processing capability enables the utilization of multiple computer monitors for tracking analytics, key indicators, news items, and stock performance. At least two monitors should be used in the process, providing the bare bones in simultaneous data display, but as many as four to six monitors is well within reason, with the added benefit of analytical flexibility.
3. High-Speed Internet
As mentioned in the story above, a seven-millisecond time interval was all it took to give waiting traders a jump on Fed news. In an age of high-speed computers and split-second decisions, anything short of a top-of-the-line Internet connection could spell unwanted dangers for day traders trying to make a living. Search for a provider with a proven track record of speed and reliability and don’t skimp on the bandwidth.
4. News and Data Feeds
With high-speed Internet and multiple monitors in place, traders should use their assets and keep an eye on news events and key indicators to measure stock performance and potential opportunities. Day trading is a highly analytical occupation, requiring all available data to make informed and, most importantly, profitable decisions. Due to the rapid pace of financial markets, fortune favors the vigilant.
5. Research Skills
If you think that profitable positions are going to leap off your screens and beg you to open them, prepare to be sorely disappointed. Basic academic research skills will help make sense of the static and point your capital in the right direction. Know your key indicators, learn to effectively leverage research solutions, and ignore nothing that might give you a hint when navigating the choppy waters.
6. Discipline
You can’t buy it at the store, but self-control can mean the difference between a new car and a second mortgage. Because of the fast-paced nature of day trading, less successful traders have learned the importance of keeping a cool head when times are good and bad. If your stocks are performing well, don’t bet the house. If your stocks are performing poorly, don’t rely on wishes and prayers to recoup your losses. Knowing the market and knowing when to hold ’em/fold ’em can make all the difference.
7. Experience
Another intangible, experience can help provide the discipline needed to stay out of the red. Market trends have developed over decades, and less knowledgeable traders may miss the forest for the trees. Getting your feet wet in the financial sector before diving into day trading can help provide valuable insights into the direction, temperament, and historical movements of markets. Better wise and wealthy than young and fool-hearty.
8. Strategy
All of this knowledge and temperance helps to construct a sound strategy that guides trading decisions before the heat of the moment kicks your brain out of the driver’s seat. Markets follow trends, motivated and moved by logic and analysis. This same thought should go into establishing a trading strategy, utilizing trade stops to mitigate losses, and making the occasional swing trade. Make a plan, find what works, and stick to it. Most importantly, if it isn’t broken, don’t fix it.
9. Capital
Day trading revolves around opening and closing positions in the span of a trading day, rarely over slightly longer periods in the case of swing trades. For this reason, traders will need sufficient capital to leverage large numbers of positions in order to overcome the attrition of trade commissions. Without this capital in place, day trading can become a losing endeavor from the start.
10. Classes
Fortunately, you don’t have to attend the school of hard knocks and lose your house in order to learn the ins and outs of day trading. If the strategies or analytics escape you, strongly consider an online course or two to glean some powerful knowledge. There’s no shame in accepting help, especially when an affordable education can differentiate you from the also-rans and cautionary tales. Enrich yourself and your process simultaneously.
Even with these tools, day trading can be a tricky task. But with education, resources, experience, and a watchful eye on market guideposts, you can give yourself a solid foundation for trading. Most importantly, do not treat the occupation as a casino. You can’t teach or analyze gambling, but you can make sound, prudent investments that lead to financial benefit and peace of mind.
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