A Guide To Day Trading

Day trading is a competitive, but lucrative endeavor. You can make some real money, but you need to have the ability to read stock charts, manipulate stock scanning software and the emotional control to manage your risk. And a whole lot of study.

No one really understands the amount of studying that is involved until they are actually immersed in it. The stock charts, software and research needed to be an effective day trader is hard to describe.

But once you master all the basics, it is time to hit the market. One thing that needs to be stressed before you really get into the market is that 90% of day traders lose money. Only 10% actually turn a profit. And most of the that 10% is pulling in a nice salary, but they are not swimming off yachts and driving fancy cars.

Of course, there are those outliers out there. Day traders trade stories all the time about one of their ilk with the experience, skills and stones to take a really small amount of money, such as $500 and turn it into six figures.

It takes a lot of skill to be able to do that. But make no mistake, it is possible to do it. There is a true story about a trader that took just a bit more than $500 and turned it into $100,000 in just 44 trading days.

The lesson of that story is that it takes years of hard knock education to get to that point. Years. And it is not just the technical know-how that you need to absorb. It is the tried-and-true lessons of hard-bitten traders. Risk management is key. There is no substitute for the hard core research that you need to do in order to spot the right penny stocks day after day.

Not only is research important, but the practice that you get day after day, making trades and seeing the results is invaluable. You need to be able to internalize those real time lessons in order to become a better trader. To get to the level where you can make $100,000 in 44 trading days, you need a whole lot of practice.

As a novice trader, just starting out, you need the freedom to make those mistakes. That is why using a paper trading simulator is an excellent way to practice in market conditions without the risk of losing real money.

Paper traders join simulated trading environments that mimic the look and feel of brokerage accounts in the real market. You get all the same information as real traders and you get $100,000 in virtual currency to trade with. Then you can make mistakes to your heart’s content. Trying crazy trades on a whim and learning what happens when you forget to put a stop-loss on your trade. Or you ignore the stop-loss on your trade and let a losing trade ride and ride and ride. It is not a fun experience. But it burns into your subconsciousness the need to studious risk management as a trader in the real world.

Day traders make their money by maximizing the profitable trades and minimizing the losing traders. A weekly profit/loss ratio that is in the black is absolutely essential. You are going to make bad trades. On any given day, you are going to lose money on a trade. The key is to be able to make those losses as small as possible and be able to make trades that more than make up for those small losses.

One other way to really learn how to be an effective day trader when you are just starting out is by regularly participating in a daily chat room. Trading chat rooms can have moderators that are veteran traders, sharing their screens with stock scanners and charts and shooting off tips and bits of info. They are places for traders of all levels to gather and talk about the market. Share stories of past successes and failures and learn from each other.

Day trading can be an isolated job. You spend all day in a home office, starting at multiple monitors with spreadsheets, spitting numbers and trends at you. One of the added benefits of a trading chat room, like the one offered by Warrior Trading, is the social aspect. Thousands of like-minded traders together in a place, trading ideas and tips and keeping each other in good spirits. It is not all about numbers and spreadsheets.

So while you may not be able to make six figures in 2 months when you start trading, that kind of feat is a real motivator for novice traders. If you have the smarts and the drive, you can make your way from beginner to profitable veteran. It just takes time and hard work.

Alexa Mason

Alexa Mason is a freelance writer and internet entrepreneur. She is also a parent to two beautiful little girls. She chronicles her journey as a single mom working on building financial security.