Day trading implies to the process of purchasing securities and stocks, and then selling them off within the same day with the goal of making a profit. At the close of the market day, the day traders tend to close all their positions and realize any gains or losses. As per Kavan Choksi, day trading is the opposite of a long-term investment strategy. Day trading is largely about buying the dips and selling high in the short term.
Kavan Choksi underlines important tips for day trading in the stock market
As a day trader, one needs to take advantage of small price moves to enjoy lucrative gains. While day trading in the stock market can be challenging for beginners, having a well-thought-out strategy can deliver good results. Here are a few tips that can help stock market beginners:
- Acquire more knowledge: Apart from being aware of day trading procedures, day traders also need to keep up with the latest stock market news and events that impact the stocks, like Federal Reserve System’s interest rate plans and Federal Reserve System’s interest rate plans. Day traders need to do their homework, make a list of stocks they would want to trade, as well as stay informed about the selected companies and their stocks.
- Set funds aside: It is important for day traders to properly evaluate and commit to the sum of capital they are willing to risk on each trade. A lot of successful day traders risk less than 1% to 2% of their accounts each trade. Investors need to earmark a surplus amount of funds they can trade with and are prepared to lose.
- Allocate enough time: Day trading requires adequate amount of time and attention. People having very less time to put in the stock market should ideally avoid getting into day trading. As a day trader, one has to track the markets consistently and try to identify opportunities that can come up at any time during trading hours
- Start small: Beginners in day trading should typically focus on a maximum of one to two stocks during a session. Tracking and identifying opportunities is way simpler when one has to deal with just a few stocks. Trading fractional shares have become an increasingly popular trend today,
- Avoid penny stocks: While it is common for beginners to keep an eye out for deals and low prices, they should ideally stay away from penny stocks. Such stocks are commonly illiquid and the odds of hitting the jackpot with them are usually bleak.
- Time the trades: A large number of orders placed by the day traders start to execute as soon as the markets open in the morning, which ultimately contributes to price volatility. Experienced day traders might recognize patterns at the open and time orders to make profits. However, for beginners, it would be a smarter choice to read the market without making any moves for the first 15 to 20 minutes.
According to Kavan Choksi, day traders need to be realistic about the profits they might make in the market. They additionally should try to ensure that the financial risk on each trade is limited to a specific percentage of their account and that entry and exit methods are properly defined.