Day trading can be a fantastic way to build a powerful investment portfolio, but a lot of people don’t know how to get started. It’s easy to assume that all you need to do is keep an eye on the stock market, and make sure that you can move quickly when an opportunity presents itself. However, there’s a lot more involved with day trading than most people assume. While staying up to date with the latest StockTwits review, and filtering your options with a trading screener can help you to get started, you’ll also need to make sure that you have a plan in place that will assist you in mitigating your risk. Here are some quick tips on how to keep your risk level low when it comes to day trading.
Managing your Day Trading Risk
Deciding how much risk you’re willing to expose yourself to in the day trading world is an important decision that often occurs after you’ve picked a market and started setting up your equipment. There are two ways that day traders can control their risk. The first thing to look at is your trader risk – or how much you’re willing to potentially lose on every trade. Most experts recommend only risking a maximum of 1% of your capital for trading on every trade. You can do this by setting a stop loss point, which lets your broker or brokerage system know when to get you out of a trade when you’re risking too much of a loss. Your trade risk will also be affected by how big your position in is in any investment, so make sure you know how to calculate the right size for an investment in futures, forex and stock.
You’ll also need to control your daily risk. One of the best ways to do this is by establishing a daily loss limit. For instance, you could set your daily loss limit at around 2.5% of your capital, so you would need to lose a number of trades with no wins to miss out on this amount of money. If you have the right strategy, your loss limit won’t be activated very often. Once you hit your loss limit cap, all you need to do is stop trading and wait for the next day to roll around, so you can start again.
Getting Started with Day Trading
Day trading can be a great way to make money, and the more time you spend in the market, the more likely you are to start earning some serious cash. However, it’s important to have the right strategy in place to maximize your wins and reduce your losses. Follow the tips above to keep your risk level as small as possible, and make sure that you pick a market to trade in that you’re genuinely interested in. This will help you to stay focused when you’re picking the right investments to get involved with. Remember, no matter what, don’t let your emotions make your decisions when it comes to day trading.