How to Get Started Day Trading

In this article, you will learn what day trading is, what the different risks and potential rewards are, what some of the best day trading strategies are.

What is Day trading?

When you hear the term daytrading or day trading it is referring to popular form of buying and selling stocks in which a trader is buying stocks and then exiting them on same day. The goal of this type of trading is to make money from very short-term movements in the stocks, QQQQs, Forex, or E-minis. The length of time that a day trader might hold a stock can vary from seconds to hours. But, by definition, a day trade occurs when a stock is bought on a given trading day and sold before the end of that session.

Do You Want to Day Trade? Keep These Things in Mind

Day trading can be lucrative. However, by nature, it is one of the most risky and challenging forms of trading and investing. Below, we've listed the main reasons. If you are determined and are willing to potentially spend many months or even years learning the ropes, don't let any of this discourage you.

Because of the brief period of time that trades are held, it allows for a very small margin of error. It your goal is buy a stock at a certain price and then sell it at a higher price within the next 20 minutes, you need to have an accurate way of finding high-probability upward price movements. While to some people that may sound easy, by and large, some of the smartest people find that it is far more difficult than they imagine. Many people who have experienced great professional success in engineering, the medical profession, quantitative mathematics, and other high-level professions believe that they can easily transfer their success to day trading, but are proven wrong year after year.
Day trading requires a great deal of mental and physical stamina. Imagine sitting in front of computer screen all day and watching every price change that occurs in a multiple stocks. And not only do day traders face this sort of challenge, they also have to deal with the inevitability that, many times, they will have losing trades. Ask yourself if you could get used to the idea of losing hudnreds or thousands of dollars in just a few minutes. Couple with that, the overconfidence that can be triggered through big winning trades. If you want to be a day trader be prepared for wide emotional swings that can negatively impact your judgment.
You need to spend a lot of money on hardware, software, data feeds and much more. Day traders typically have an expensive setup that includes the most fastest and most powerful computers, multiple flat screen monitors, and expensive real time data feeds. They have to continually pay brokerage fees, education in order to learn professional-level systems and strategies and also pay a substantial amount their earnings on taxes. And to get started, brokerage firms in the U.S. require that you have a minimum account balance of $25,000.
You must deal with administrative tasks which have nothing to do with trading. Federal tax laws governing day trading in the U.S. are complex. As a day trading you can have hundreds or perhaps even thousands of transactions each year. Each of those transactions has be be reported to the IRS when filing your tax returns. Ask your own tax expert for full details.

Characteristics of Successful Day Traders

Success doesn't come overnight in day trading. Many professionals take years of hard work to get the point at which they able to earn a steady income. That said, there can be potential rewards if you're able to pay the price. Here is a simple framework that we believe can lead to success:

First, you need to find a systematic method which removes most (if not all) of the emotion and discretionary judgment from your trading. Be prepared. It could take years to develop or find such a method. Once you have identified a system that can be profitable over the course of time, then you have to develop a mindset in which you:

Focus on executing your system perfectly for each individual trade.
At the same time, you focus on weekly or monthly gains and not the results of individual trades.
Track and quantify your performance mercilessly.
At the end of each day, each week, and month evaluate your actions and then commit doing better tomorrow. Stay positive in your thoughts and spoken words.
Stay away from negative influences that cause you to have doubts and fears about your abilities as a trader.
Teach others to maximize their performance and in so doing, maximize your own.

We hope you have enjoyed this article. It has been designed to provide you with a basic framework for success in day trader. But obviously, there are a lot of details that need to be filled in. Go slow, take your time and get focused. If you'll do that, you'll avoid the burn out that grinds most beginning day traders to a pulp and rise up to the upper echelons of success.

The Connors Group, Inc. ("Company") is not an investment advisory service, nor a registered investment advisor or broker-dealer and does not purport to tell or suggest which securities or currencies customers should buy or sell for themselves. The analysts and employees or affiliates of Company may hold positions in the stocks, currencies or industries discussed here. You understand and acknowledge that there is a very high degree of risk involved in trading securities and/or currencies. The Company, the authors, the publisher, and all affiliates of Company assume no responsibility or liability for your trading and investment results. Factual statements on the Company's website, or in its publications, are made as of the date stated and are subject to change without notice.

It should not be assumed that the methods, techniques, or indicators presented in these products will be profitable or that they will not result in losses. Past results of any individual trader or trading system published by Company are not indicative of future returns by that trader or system, and are not indicative of future returns which be realized by you. In addition, the indicators, strategies, columns, articles and all other features of Company's products (collectively, the "Information") are provided for informational and educational purposes only and should not be construed as investment advice. Examples presented on Company's website are for educational purposes only. Such set-ups are not solicitations of any order to buy or sell. Accordingly, you should not rely solely on the Information in making any investment. Rather, you should use the Information only as a starting point for doing additional independent research in order to allow you to form your own opinion regarding investments. You should always check with your licensed financial advisor and tax advisor to determine the suitability of any investment.

HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN INHERENT LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING AND MAY NOT BE IMPACTED BY BROKERAGE AND OTHER SLIPPAGE FEES. ALSO, SINCE THE TRADES HAVE NOT ACTUALLY BEEN EXECUTED, THE RESULTS MAY HAVE UNDER- OR OVER-COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAT ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFITS OR LOSSES SIMILAR TO THOSE SHOWN.