Trading in stock market is a very risky job. But if you have proper knowledge and skills then you can end up making good bucks. How many times you have to bear losses on the stock that you have bought on someone’s advice? Well, once in a life time you definitely have face this situation. Nowadays day trading has become one of the most popular mode of trading. While investing via day trading, you need to follow proper rules and strategy. If you want to know what is day trading? How one can start day trading? What are profitable day trading tips? Then you have come to the right place. Let’s get started.
What is Day Trading?
Day Trading means buying and selling of stocks for a period of single day. Single day trading is done in order to reap out the benefits arising from the fluctuation in price of a particular stock in a day.
Day Trading Tips
1. Proper Knowledge and Skills about Day Trading
No matter whether you are investing for long term or short term or day trading. One thing which is extremely important is that should have proper and right amount of knowledge and skills. There are a number of terms which are involved in trading like call option, put option, stop loss trigger, delta, alpha etc. Now you need to have proper knowledge about these terms along with the financial status of the company along with the news floating in the market etc.
2. Play with limited money
I have seen people loosing huge amount of money while doing day trading. Since it is highly risky my advice is to start with small amount of money. While investing keep in mind that you employ only about 4 to 5% of your equity corpus.
3. Set Price Target before Taking Position
This is one point where almost all the investors commit mistakes. Well, before investing you must set a price target in advance. If you would have set up price target than it might save you from incurring potential losses or even controlling your emotions when price tend to change.
4. Bigger is better
While day trading you should always invest in bigger stocks. You should always invest in large cap company stocks. Since the trading volume in such type of stocks is very high so you have enough information about such type of stocks.
5. Always book losses
If you have committed any loss in the past due to wrong decision or because of over expectation from a particular stock. Well in that case you should never really expect for turnaround and you should never add any stock in losing position.
6. Stop loss is Preferable
Well you should always prefer stop loss while you are into day trading. Since stop loss helps the trader to reduce their loss. Let me explain this with an example, assuming that you bought X stock for Rs 400 and you have set up a stop loss for Rs 380. Now if the price of the X stock will fall and suppose the price feel down to Rs 200. Just assume the level of loss you might have incurred. Since you have set stop loss at Rs 380 so you will not exit the transaction as soon as it will reach Rs 380.
7. Say no to Penny Stock
Penny stocks are not basically for those who are day trader. Since volume in penny stock is very low so the chances of losing the money is also very high.
8. No Overtrading
It is very important to minimize your trading. Well there is no compulsion that you undertake trading on daily basis. You can undertake day trading few times a week.
9. Follow News
Another day trading tip is to follow the news on daily basis. When you have invested in stock market you must always follow the news. Since the movement in share market is even affected by the news. When there is some negative news in the market then you should never deal in stocks.
10. Control your emotion
Having proper control over your emotions is one of the most important day trading tips. While dealing in stock keep your emotions in your pant and your analytical skills on your hand. Decisions involving emotions may lead you towards heavy losses.