You need to understand that day trading is an art and not a science. Even though the artists study techniques of the masters, who came before them, even the artists need to find their own ways of creating art. The same holds true with day trading as well. There is no right way of trading. Here we shall discuss some of the questions that you need to ask to understand the right business strategies:
How much time should you devote for doing business?
When you are reading this article, let us as assume first that you are not a professional trader. You are rather a market enthusiast, who trades occasionally and looking for ways to develop the best day trading strategies. Firstly, you must be aware of the specific trading tools to find your effective style of doing business. If you simply wish to devote an hour or two in trading each day, then holding different trading positions in a given trading season will not make much sense. You must be well aware of your time constraints and know the number of positions that you can manage simultaneously. Once you know the number of businesses you can manage once, you need to hone your research.
How to research and identify stocks for buying and selling?
There are different ways to identify the potential winners. Most of the experienced dealers conduct their research based on different technical analysis. Even though this is not hard, it requires upfront commitment to educate yourself. You can avail of different types of study materials such as webinars, seminars, and on-line forums and so on. Whatever measures you employ to pick to do business, whether you follow the research of the fellow traders or opt for your own measures, you need to derive a trading plan for each of the sessions that you undertake.
What elements to be incorporated in the daily trading plan?
An effective trading plan includes more than identification of stocks for trading. Each of the stock that you identify for potential trading, you need three parameters to reflect the personal risk to reward ratio, a stop-loss, a targeted exit price and a targeted entry price. Targeted entry price ensures that you do not enter a business without taking into account the present day’s momentum. A targeted exit price ensures you stay in the business for long and put the profits at risk. Stop losses finally help preserve trading capital in case trade goes against you. Incorporation of these three elements in the day trading strategies will add structure to the deal season and also control emotional trading.
How to handle inevitable losing deal?
Every trader has losing trades. Reaction to losing trades can have a huge impact on the overall success of a day trader. Your losing trade must not affect the way you manage your next trade. You must be wary of trying to “win back” the lost capital in subsequent trades. You need to manage each and every trade separately. However, you must also learn to remember to stay within the personal trading parameters on each and every trade.