Following are some facts and common sense rules about day trading that all serious traders should know. Here is the reason why some traders lose money with stocks, currencies, futures, or anything else, and it is because they do not have a basic understanding of important concepts like these. You must never let this happen to you. If you find these rules simple yet you must essentially implement them.
It is found that the term “day trading” is a widely misused and misunderstood the term. In actual, day trading means not holding on to your positions beyond the current trading day. Or in other words, you cannot leave any position open into the market close. Day trading is really the safest way to trade as you are not exposed to the potential losses that can occur when the stock market is closed due to the news that can affect the prices of your stocks. Regrettably, many self-proclaimed stock “day traders,” hold stocks overnight due to fear or greed, thus setting themselves up for the catastrophic elimination of their capital in an unforeseen event. You must essentially follow following rules;
Limit your losses when trading.
Limiting your loss is one of the most important rules that a day trader should learn. However, there is no thumb rule to be a successful active trader or to limit your losses. But some basic steps can be followed. A large number of people lose money in day trading is due to not limiting their losses.
Trading is only for part of your money.
Another basic thing to remember is that you must not day trade with all your money. This implies that you will only use part of your money for day trading. You must ensure that a bulk of your capital should be in very solid, fundamentally sound investments. Therefore, it was chosen for fundamentally correct reasons unless you become an extremely successful and reliable day trader.
Trading requires proper training and practice.
You can assume day trading like any other business that you run since it needs a lot of hard work and dedication on your part. A large number of people makes the mistake of “sending” an order to buy or sell a stock or currency to the market with “trading.” It is very easy to send an order to the market. Day trading certainly takes time to master. You must dedicate at least a few hours a day to do become master of it. If you are not willing to dedicate the time required, then you must not expect rewards in return and do not waste your time cutting corners.