Beginners Guide to Day Trading
Aug 10, 2022
The world of day trading is a mystery to most people. Misinformation and preconceptions about what day traders do might be a barrier of resistance for some people to get started. Most people believe they do not have enough money to get started with day trading, but really what they are lacking is adequate knowledge about day trading.
Once beginners realize the earning potential of trading in a stress-free environment, they often wish they would have gotten started sooner!
At Responsible Day Trading, we teach beginner and intermediate day traders how to day trade with low risk by using tried-and-true trading strategies. In this blog post, we explain what day traders do in terms that everyone can understand. Day trading can be a lucrative side hustle or full-time job for anyone who has the motivation to learn new skills and grow their wealth.
New to day trading? Don’t worry, we’ve got your back! Our guide to day trading is easy to understand for beginners who are just getting started.
How Does Day Trading Work?
Day trading is short for intraday trading, a financial term for transactions made within the same business day. In short, day trading is buying and selling an asset on the same day to capitalize on the fluctuation of financial markets. A day trader purchases an asset and sells it for profit all on the same day.
Responsible Day Trading focuses on day trading on the S&P 500 index, which is an index of the top 500 companies in the US. The value of these companies is always going up and down, which creates an opportunity for generating consistent profits.
Forex (foreign exchange market) and cryptocurrency can also be profitably traded on an intraday basis because the value of currencies is constantly fluctuating.
Day Trading Strategies
The best way to generate consistent profits with day trading is to learn and practice a day trading strategy. Strategic trading is essential for minimizing risks and keeping profits high. Here are three of the most common day trading strategies that have proven results.
Trending
When a company, currency, or financial asset is swinging higher in the market than usual, this is called a trend. The trending strategy focuses on watching for and reacting to up swings in the market. A trend could also swing in the opposite direction, which is called the reversal strategy. Multiple factors could cause a company’s market value to skyrocket
When a company or financial asset is trending in the market it will usually swing up, then pull back slightly, and then swing up again. Day traders can use the trending strategy to capitalize on the predictability of these trends and make profitable transactions.
Scalping
The scalping strategy is one of the most profitable and easy-to-learn day trading strategies for beginners. Scalping means waiting until a trade becomes profitable and then immediately selling. This is done by monitoring technical indicators and making trades based on predictable patterns in the market.
Financial markets will always fluctuate up and down, so all a scalper needs to do is buy when it is down and sell when it is up to generate a profit. Sounds simple right? Not exactly. You still need to know how the market works, how to interpret technical indicators, and how to manage the risks of day trading like revenge trading. With the scalping strategy, day traders can generate consistent profit by making a high volume of small transactions. Scalping is a lower-risk form of day trading than using the trending strategy and it can yield high profits.
Reversal
The reversal strategy aims to profit off of the reversal of a trend. Day traders use the reversal strategy to gain profits even when the market is on a downswing by predicting when investors are going to start selling off. When a trend is reversing, there are predictable patterns of fluctuation that day traders can use to buy and sell at a profit.
What You Need to Get Started Day Trading
Anyone can get started with day trading using as little as $100! Emicro and Emini futures contracts are a great starting place for beginner day traders because they can be purchased for $50 or less. The scalping strategy is perfect for beginners trading Emini contracts on the S&P 500 because there is a responsible risk-to-reward ratio.
You can get started day trading with very little money, but to be successful as a day trader you need more than just the initial capital. Profitable day traders are constantly studying the market, tweaking their strategies, and learning from the experts.
Know the Market
First and foremost, day traders need to know the ins and outs of the market that they are trading on. Whether it is the S&P 500, Forex, or crypto –day traders need to know how the market works to appropriately react to trends and technical indicators.
The scalping strategy that we use relies mostly on technical indicators, but having sufficient knowledge of the market is essential for being successful with any day trading strategy. A lack of knowledge of how the market works is one of the main reasons why some day traders lose money when they are in their beginner stage.
Know Your Strategy
The second thing that day traders need to learn is their strategy. Pick a strategy that works best for you and become an expert at it by constantly practicing and improving. There are market simulators that you can use to practice your strategy before using actual money.
Once you have mastered a strategy, you can tweak it as needed to remain profitable no matter what the market conditions are.
Know the Risks
Day trading is not a get-rich-quick scheme. It can be a profitable side hustle or full-time job when done right, but day traders also need to know the risks. Jumping right into trading without adequate knowledge can cause day traders to sustain financial losses.
Researching and practicing your day trading strategy will help you to make consistent profits even if you are a beginner.
The scalping strategy is a relatively low-risk strategy for beginners. By making a high volume of more trades in small amounts, day traders can generate consistent profits while keeping their risk-level low. You win some, you lose some; but with our day trading strategy, we aim for the potential profit to be at least double the potential risk for each trade.
Day Trading As a Full-Time Job
Day trading as a full-time job is an alternative career choice that works better for some people than working a 9-5! Some people prefer to limit their time day trading to only a few hours each day. As you get better at day trading, you may want to start trading full-time because of how fun and easy it is to make an income.
One of our goals at Responsible Day Trading is to demystify what day traders do and help beginners tap into the profitable market for themselves! Benefits of day trading as a full-time job include making your own schedule, working fewer hours, and trading in a stress-free environment.
Conclusion
Day traders capitalize on the fluctuations of financial markets by buying and trading assets before the close of a business day. There are multiple different strategies that successful day traders can use, but we definitely recommend the scalping strategy for beginners.
The scalping strategy involves making a high volume of small trades each day to generate consistent profits, and it does not require watching the news as some strategies do. Once you know the market and how to interpret technical indicators, you can start making trades with the scalping strategy in minutes. Whether your goal is to be a full-time day trader or to supplement your income, our team of day trading experts is here to help.
We provide beginners with one-on-one coaching on how to generate consistent profits trading on the S&P 500 with Emicro and Emini contracts. Check out our YouTube channel or reach out to us if you are interested in learning more about how our day trading mentorship program can help you reach your financial goals!
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