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An Introduction to Day Trading

An Introduction to Day Trading

Day trading can be seen as a full-time job or a past time that will add excitement and hopefully some extra funds to your life. While you don’t need a lot of fancy equipment or set up to get started, you do need the time and willingness to learn everything about the market and how it moves before beginning. No matter which market you choose; whether it’s forex, stocks or futures, it’s the same deal. Spend due time learning how the markets work, understand the risks involved and make your trading charts that will lead you and guide you through each trade.

Choosing Your Market

The first thing for you to decide is which market you will trade in. You might make this decision according to your interests. Is there a specific item that you want to deal with? But for many, the deciding factor is how much money is needed up front to begin. For that reason alone, many choose forex because it requires the least amount of money to get started. And it promises huge potential. You can begin trading forex with a few hundred dollars, although you shouldn’t start with less than $500. With some futures markets you can begin with $1,000, although $2,500 is the recommended amount to begin with. Stocks, on the other hand, require not less than $25,000 to think about day trading. You can make money in any of these markets, but choose the one that best fits your budget. Then go on to choose the trading platform that suits your market.

Choosing Your Time

Whether you are working at day trading on a full time basis in an office or part time from your home it makes no difference. What matters most is understanding which are the best hours to trade and being consistent. Trading at the same time each day is one way of staying consistent, even if it’s only for a few hours. Whether it’s stocks, futures or forex, day traders often place trades for only a few hours each day. A good time for stocks is the first hour or two after they open and maybe the last hour of each day. But you can trade forex anytime during the week. It’s open around the clock. The foreign currency market is always open somewhere in the world, so choose your time frame and then see which market is open at that hour. The most popular times for day traders are when two currencies overlap, such as the EUR and the USD. The futures market is best at opening.

Managing Your Risk

Once you’re set up and ready to go with adequate background knowledge, a laptop with internet and your trading charts, you need to evaluate your risk. Learn how to control both your daily risk and the risk to take on each trade. Trade risk is usually set at 1% of your total capital on each trade. A daily loss limit could be something like 3%. Whatever you decide, stick with your plan and don’t let the thrill of the moment put your money in jeopardy.




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