Understanding all there is to know about day trading for dummies takes time, patience, and perseverance. Despite the effort though, there can be a big payoff once you master the ropes that we are about to show you in this short piece. Never consider yourself a dummy when it comes to day trading again… from hereon in, you’ll be one step closer to becoming a major pro.
Day Trading for Dummies – Markets & Stocks
Let’s start at the absolute basics of day trading. Companies list their shares on the stock market in order to raise funds or capital from the stock market. Day traders and investors offer up these funds in the hope that they’ll be able to buy a particular stock at one price and then sell it at another price – usually at a profit. This is the market for stocks and shares and every country has such a marketplace. In the US the markets for this buying and selling of stocks is the NASDAQ and NYSE. Both are present the biggest marketplaces globally and only exchanges in Europe and Asia come close enough in size. Trillions of dollars are traded on stock exchanges every year.
As an individual trader looking to avoid day trading for dummies, the best way to get into the markets is via a brokerage account. Once you are singed up you can buy and sell shares in any particular company you want. That’s provided you have enough money to buy each shares. The process is not that hard, but there is a catch.
Day Trading for Dummies – Why Day Traders Fail & What to Do About It
Despite the ease of buying and selling stocks, 99% of traders fail. This happens for a number of reasons, but the chief causes for failure include not enough adequate research on individual stocks that a day trader buys. Traders also fail because they fail to understand the technical details associated with a stock. Another reason traders fail is through poor discipline; this manifests itself in holding onto losing stocks and sometimes by selling a shares in a company too quickly.
To minimize the chances of failure, a day trader looking to avoid day trading for dummies as a nickname can use the following tips. Always set trades with stop losses. This is a very rudimentary system and most brokerages will allow a day trader to set one up. All a stop loss does, is specify a price at which you want the stock to be sold in the event that the price starts dropping. So as an example, let’s say you bought $10,000 worth of shares at $1 and find that the stock in question is now trading at 80 cents. Provided you set a decent stop loss, say 95 cents, the fallout from such a decline wouldn’t hurt you because your broker would have sold your shares before valuation reached 80 cents. Stop losses are very effective at safeguarding against heavy losses in the early stages of a day trading career.
Day Trading for Dummies – Two Helpful Indicators
Another thing traders can do to minimize losses is to get fully conversant with key technical indicators. Things like Relative Strength Indicator (RSI) and Simple Moving Average (SMA) are very good starter indicators that pack a rich set of data upon which informed choices can be made. In the case of RSI, a stock that is trading at say 75 RSI is considered overbought. This means that the price has moved up over a solid stretch of trading. Once RSI reaches a level of say 80, conventional wisdom says brace for a pullback. At this stage you shouldn’t have a position in any stock with such a high RSI. Maintaining a positioning at this high level of RSI exposes you to the eventual sell-off.
Another tip is to use simple moving averages to gauge the momentum of a stock. Simple moving averages track the average price movement of stocks over time and are typically measured at intervals of 50 days, 100 days and 200 days. Positive movement over a short period of time suggests interest in a stock, a signal that can be used to determine entry. Negative movement can also be used as a signal, though not in the same way. Whilst negative movement may seem like a good time to exit a stock, it can be helpful for a trader who through studying other indicators, believe that the stock might be due for a rebound. Used in conjunction with RSI, simple moving averages can be powerful tools for picking winning stocks.
Now, once you understand all there is to know about day trading for dummies you might want to get trading stocks right away. To do that you can simply sign up to a stock picking newsletter. This gives you the very quick advantage of well-researched stocks with very little effort on your part. If you haven’t yet signed up to a newsletter you can get started with this free service. It’s 100% free to join and you can start receiving alerts. Sign up now.