Day trading is one of the most interesting ways to make money through the internet. By day trading you can quickly buy and sell shares. If you make the right decisions, you can make a lot of money. But how does day trading in shares work? And how can you make sure you achieve a profitable result? In this article you learn everything you need to know in order to get started yourself!
Did you know this about day trading?
- You can do day trading 24/7: determine your own working hours!
- You can buy and sell shares within minutes.
- Even when a share performs poorly, you can make a profit.
- You can try day trading risk-free with a free demo.
Do you want to start trading stocks? Then it is wise to try it with a free demo first. Use the button below to see which brokers allow you to open a demo for free:
How can you make money trading stocks?
There are several ways you can make money trading shares. You can choose to invest actively in stocks as a day trader. Alternatively you can choose to use shares to build an income long term.
Working as a day trader
As a day trader, you buy and sell shares in the short term to take advantage of both rising and falling prices. Nowadays you can short sell shares with any modern broker, which means you earn money as soon as the price drops. The option to short sell gives you more opportunities to achieve a high return than traditional investing.
By using the ability to short sell, you can benefit from trading under all market conditions. The price of a stock can move both down and up in a single day and you can make a profit in both cases. In traditional investing, you usually only make a profit when the price rises.
Making a living from shares
It is possible to build an income by trading shares. You do this by buying stocks with high potential. Companies with good profits regularly choose to pay dividends. A dividend is a payment of part of the profit to the shareholder.
The smart, active trader does not just day trade. It may be wise to lock some of your profits into long-term stocks. By applying this strategy, you both build up wealth and an income. The trading tip of the day is not to bet all your money on one strategy. That way you greatly increase your chance of success!
What are the basic principles of day trading?
In day trading, you trade shares with the aim of achieving price gains. You often keep the shares for a short time, and you try to achieve a high return in this time. This manner of investing is the opposite of building a portfolio through which you invest with the aim to grow your wealth in the long term.
With day trading, you usually earn more money because you sell your shares on quickly. Annually, share prices changes are limited. In the short term, however, this is different! Every hour the price rises or falls and as a day trader you can benefit from these movements.
How can you start working as a day trader?
If you want to start trading shares as a day trader, it is wise to open a broker account. You can open both a demo and a live account with most brokers. With a demo account you can use a fictitious amount to practice trading shares completely risk-free and with a live account you can start trading immediately using real money.
With a broker's day trading software you can easily trade in different stocks!
What is the best way to get started?
A skilled equities’ trader should not only be able to deal with numbers: in fact, numbers only play a limited role. In the end, your mindset is the most important element within your trading strategy. Once you have developed a system that works and you start to make money, you have to keep following this system.
In fact, your trading system is just like your marriage partner: together, both in prosperity and adversity. Especially the latter can be tricky, but remember, a good trader cuts off losing trades early. Likewise, in prosperity people sometimes get disorganized and close their position on a share too quickly. By doing so they do not benefit from the full movement. It is therefore essential to always try to remain rational and decide in advance what your goal is!
By setting your own rules and complying with them, you can trade shares more rationally and successfully.
Some final stock tips
Of course, as a trader you want to achieve good results. It is important to invest in a smart way. An important tip is to follow the trend as much as possible. When the markets have been rising for months, it can be very risky to bet on a decline.
A second stock tip for the active trader is to always use a stop loss. With a stop loss, you can set a value where you automatically take your loss. This prevents you from losing your entire investment due to one bad investment.
The third tip is not to consider yourself rich right away. Investing is a skill that needs to be learned, and the only way to really learn investing in stocks is by practicing a lot. You can learn how to invest by opening a free demo with a broker.
The fourth tip is to remember that a higher profit often means a higher risk. If you use speculative investment products, you are more likely to lose a substantial amount. Therefore, only invest in a way that suits your personality. Will losing a lot of money with your shares keep you up at night? Then maybe you should do something else.
Finally, it is important to understand the difference between the average return and the total return. On average, people who buy shares achieve a return of 8% on an annual basis. However, this does not mean that you achieve this return every year. One year you can get a return of 30% as an investor while you lose 20% in another year. Active investors therefore win in the long term.
Learn from my experiences
When I was young, I thought I was going to get rich trading stocks. I opened an account at Plus500 and started trading with a few hundred dollars. I didn’t really have a strategy: I looked at the chart and randomly opened stock positions based on price patterns.
Sometimes this went very well for me. When I was at school, I looked at my phone and saw that I had earned $800 with a stock position while I had only wagered $100. I used a multiplier that allowed me to take a bigger position. Other weeks, however, I also lost hundreds of dollars.
For that reason it is important not to count yourself rich too quickly. You can certainly make a lot of money trading shares, but the risks are also significant. Therefore, only trade with money that you can really afford to lose. That way it will remain fun!
Mistakes that cause you to not make any profit by trading shares
No one is perfect. If you seriously want to make a profit from trading stocks, you need to avoid making these typical mistakes.
Waiting for safety
Investing in stocks is never safe. When you wait until it is safe, you miss out. Especially in times of crisis, you can make a lot of money by investing. However, it is important that you make good decisions. Fear is a strong emotion, but what has fear brought humanity? Nothing but loss!
Waiting for a lower price
The stingy investor does not buy a stock even when the price is very attractive. The fact of the matter is that no one can predict how the stock price will develop. Do you see an outside chance? Then now is the best time to buy. No one knows for certain whether the price will drop any further.
Trading in ‘funny’ shares
Amateurs only trade in fun stocks. Buying and selling shares because you like the brand is not a winning strategy. Consider if the company has potential to make a profit in the future. If this is the case, you may decide to buy the stock.