This chapter will provide you with 10 of the most important rules in day trading.
1. Avoid market orders – With a market order, your broker will simply try to sell or purchase assets at the current market prices. However, most of these transactions will be unprofitable because you have limited control over the specific prices at which the assets will be traded.
There are times when certain assets experience temporary boosts in price. When this happens after you placed a market order, you will be losing lots of money. There are times when it happens the other way around. Some assets suffer from excessive price reductions, although temporary. If you sold your asset and it suddenly experiences this kind of unjustified devaluation, your expected …show more content…
If you know how to get in or out of a transaction, you will have better chances at earning profits and protecting yourself against market downturns.
4. You should not trade within the first fifteen minutes of the trading session – The initial 15 minutes of a market’s session are usually full of anxious trades or purchase orders submitted the night before. Inexperienced day traders must stay away from this timeframe while also searching for price reversals. If you want to earn quick profits, it would be best to wait around until you spot lucrative opportunities. Actually, many professional traders also avoid doing business during this time period.
5. Beginners should stay away from margins – When a trader uses a margin, he will be borrowing funds from his broker to finance his transactions. Full-time traders are often permitted to utilize 4:1 margins during a single market session. For example: if you have a $25,000 trading account, your brokerage company will give you sufficient purchasing power to buy $100,000 worth of assets. However, the margin requirement stays at 2:1 ratio for overnight …show more content…
However, only few people have the confidence and discipline needed to consistently earn profits. Inexperienced traders often encounter problems in controlling their emotions, which is the reason why certain guidelines or rules can be a huge help. Keep in mind that logical rules can help you stay on the right track.
10. Practice your skills using a paper-trading account – Not all traders agree that practicing your skills with a virtual account is important, but it can certainly help beginners become familiar with how the market and assets work.
If you will start a virtual account, try to invest with a realistic amount of capital. You wouldn’t learn much if you will practice purchasing assets with millions of dollars (i.e. virtual money) if your available fund in real life totals $200,000. In addition, if you will use this learning method, do not think of it as a simple game where you can just do whatever you want. You will only benefit from it if you will consider it as an educational
1. Avoid market orders – With a market order, your broker will simply try to sell or purchase assets at the current market prices. However, most of these transactions will be unprofitable because you have limited control over the specific prices at which the assets will be traded.
There are times when certain assets experience temporary boosts in price. When this happens after you placed a market order, you will be losing lots of money. There are times when it happens the other way around. Some assets suffer from excessive price reductions, although temporary. If you sold your asset and it suddenly experiences this kind of unjustified devaluation, your expected …show more content…
If you know how to get in or out of a transaction, you will have better chances at earning profits and protecting yourself against market downturns.
4. You should not trade within the first fifteen minutes of the trading session – The initial 15 minutes of a market’s session are usually full of anxious trades or purchase orders submitted the night before. Inexperienced day traders must stay away from this timeframe while also searching for price reversals. If you want to earn quick profits, it would be best to wait around until you spot lucrative opportunities. Actually, many professional traders also avoid doing business during this time period.
5. Beginners should stay away from margins – When a trader uses a margin, he will be borrowing funds from his broker to finance his transactions. Full-time traders are often permitted to utilize 4:1 margins during a single market session. For example: if you have a $25,000 trading account, your brokerage company will give you sufficient purchasing power to buy $100,000 worth of assets. However, the margin requirement stays at 2:1 ratio for overnight …show more content…
However, only few people have the confidence and discipline needed to consistently earn profits. Inexperienced traders often encounter problems in controlling their emotions, which is the reason why certain guidelines or rules can be a huge help. Keep in mind that logical rules can help you stay on the right track.
10. Practice your skills using a paper-trading account – Not all traders agree that practicing your skills with a virtual account is important, but it can certainly help beginners become familiar with how the market and assets work.
If you will start a virtual account, try to invest with a realistic amount of capital. You wouldn’t learn much if you will practice purchasing assets with millions of dollars (i.e. virtual money) if your available fund in real life totals $200,000. In addition, if you will use this learning method, do not think of it as a simple game where you can just do whatever you want. You will only benefit from it if you will consider it as an educational