Are you new to the day trading game but can’t wait to get started? I don’t blame you. Day trading can be an exciting and profitable venture. However, it’s best for the rookie trader to keep some important day trading rules in mind so that you can make the most of your opportunities without losing your shirt!
As a refresher, day trading is different from investing. When you invest in a stock like Amazon.com (Nasdaq: AMZN), you are riding the stock for the long term. You may be holding the stock for years, or even decades. Not so with day trading: A day trader buys and sells a stock within the same day (intraday trading).
The whole point of day trading is to get in, make a quick profit and get out. Over time, these profits will compound and can help you make a lot of money. Of course, don’t forget that you could also lose a lot of money if you aren’t careful. That’s why it’s good to know the day trading rules below to keep you out of trouble.
Day Trading Rules You Need to know
When entering into a rewarding but risky venture, it’s always good to have some rules of the road to keep you out of trouble and on the path. Day trading for beginners is hard, but knowing these day trading rules can help things go smoothly.
Of course, these aren’t immutable laws of nature and you’re free to tailor them to your own needs. After all, day trading stocks is a little bit different for every investor and you may need to adapt these rules of thumb to your own practices and needs.
Finally, remember that these rules aren’t meant to be oppressive. Day trading should be a fun and exciting venture for you. After all, who doesn’t enjoy making a lot of money if they’re playing the market?
So let’s get started on the day trading rules for rookies:
The Five Day Trading Rules for Rookies
Rule 1: You Must Have a Plan
The absolute first day trading rule is that you must have a plan of execution. You cannot go into this blind or you’ll lose a lot of money in a hurry. As the old cliché goes, “Not having a plan is planning to fail.”
There are many day trading strategies, including:
Day trading strategies are not static, and they evolve over time. Not to mention that there are many more than those I listed here. But you should still familiarize yourself at least with these most common day trading strategies, and then decide which one is best suited for you.
Rule 2: Learn Using Play Money
As day trading rule #2, I highly suggest that you don’t start out using real money. If you’re looking for a good stock trading simulator, my colleague Matt Makowski put together a great list of the best ones.
Day trading requires skill. You’re …read more
Source:: Investment You