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Day Trading Secrets for Beginners

Admit it – many of you embarked on this journey in stock market education in order to make huge financial gains. After all, money may not buy everything, but it sure does come quite close, doesn’t it? Now, here’s the thing. If your aim is to make a great deal of profit from the stock market, one of the simplest ways to do it is through day trading.  

Well, I can hear you, “Must be easy for Todd Rampe to say, he is an expert day trader”. But the truth is, I started off from where you are right now – as a beginner. However, I did manage to scale up quickly and start making consistent profits within a short time, thanks to some great trading secrets I was able to uncover. If you too wish to know about the secrets of becoming a good day trader, read on!

So, let us begin from the basics. When a trader opens and closes his market position within the same day, or holds the position for just a short time, it is called as day trading. Now, following are some confidential rules for making consistent profits as a day trader.

#1 Have a price target in mind: Before choosing a trade, have a target price in mind, as well as a stop loss level. More importantly, stick to this plan! This would make sure that you have good profits while limiting your losses.

#2 Risk reward ratio of 3:1 is best: Whenever picking a trade, ideally aim for profit equivalent to thrice the amount of money you are willing to risk on your stop loss. Once you gain more experience, you can aim for 5:1 ratio.

#3 Choose good Entry points: Your entry points can literally make or break your trade: For example, assume that a stock moved from $20 to $25 in a day. Peter buys 100 shares of the stock at a price of $21 and Matt buys 100 shares at $24. Now, who would make bigger profits if they close the trade at $25? Obviously, Peter. Why? Because he had a better entry point!

Here’s a tip on picking out good entry points – choose the scenarios wherein there is a good deal of imbalance in demand and supply. This means that the price will move up whenever there are more buyers even when supply is near exhaustion. Conversely, whenever there is excess supply and less number of buyers, the price will move down.  

#4 Patience and Discipline matters: Many times, you might have to wait for a while to get a good trade setup. So, it is okay even if you don’t get to trade every day. One good trade would always be better than 10 wrong ones. Always try to develop patience to wait for the trades as well as the discipline to curb the impulsive trading while you wait!

#5 Risk the money you don’t really need: Never trade using the money you absolutely require. You should also have a defined budget for trading for the day. Typically, depending on your risk appetite, do not lose more than 2% to 10% of your total money.

#6 Stocks is just one asset class: You can also be a day trader for Futures, Forex, as well as Options. So, don’t limit yourself to just stocks trading. Even when there are no opportunities in stocks trading, you might find a lot of them in the other three asset classes.

#7 Experience is the best teacher: Just as dry lands doesn’t make a good sailor, you will only become expert day trader by actually doing trades. So, don’t shy away from hitting that order button when good opportunities present themselves.

So, there you have it. The converted list from Todd Rampe on the “Secrets for becoming successful day traders”. Try following them diligently, and hopefully you will be raking in profits in no time!!