Day trading is one of the most lucrative ways to make money online. Day trading entails buying and selling stocks very quickly and by trading stocks this way you can make a lot of money. But how does day trading stocks work exactly, how do you make money day trading and how can you get started?
How to get started as a day trader?
If you want to start trading stocks as a day trader, the first thing you need is an account with a broker. With most brokers you can open either a demo account or a live account. With the demo account you can trade stocks using fictional money. This way you can try out trading completely risk free. Alternatively, you can get a live account and start trading with real money right away.
Basic principles of day trading
With day trading you trade stocks to make a profit. You only own the stocks for a short length of time and you try to make as much profit as you can within that short period. This style of trading is the opposite of building a portfolio where you own stocks long term to grow your capital.
You make more money as a day trader because you can buy and sell stocks much more quickly. Annually, the prices of stocks only fluctuate a little, but short term their prices can fluctuate greatly! Every hour the prices of stocks go up and down and as a day trader you can profit from these movements.
Earning money trading stocks
As a day trader, you trade stocks in a way that allows you to profit from both increases as well as decreases in price. With every modern broker you have the ability to short, which means you can make money even when the price goes down. This amazing feature gives you more opportunity to generate profit compared to traditional trading.
By shorting you can ride the waves both up and down. The price of a stock can fluctuate significantly during the day and you can profit either way. With traditional trading you can only profit when the price of a stock goes up.
An example of day trading software
What is the best way to get started?
A good stock trader has to be good with numbers, but that’s not all. In fact, numbers play only a limited role. Eventually it’s the psychology that plays the most important role. Once you’ve developed a system for yourself that works and earns you money, you need to keep following this system.
Your trading system is like your marriage; you stick with it in sickness and in health. That last bit can be very tricky, but it’s important to remember that a good trader cuts his losses in the early stages. Even when things are going very well people can get confused and close a position too soon. Don’t. Instead, try to stay rational and decide what you’re going to do before you open the position.
By creating your own rules and following these rules, you will be able to trade stocks more rationally and successfully.