The Do’s and Don’ts of Day Trading Strategies for Beginners

The stock market can be quite daunting for the newbie. There is a rapid insurgence of data, statistics, opinions, strategies and dynamic stock market changes. In such a situation, it becomes difficult to determine a strategy that works best for you. There are several factors that need to be considered, the most important being the amount of investment capital that is available with you. Often it is advised that using Day Trading Strategies is the best approach that a new trader should adopt mainly because it gives you more opportunities for generating profit out of your limited capital. Here is a simple yet effective description of day trading strategies that every beginner can adopt. Strategies for Making an Effective Entry When you are planning on making an entry, it should be accurate and should be one that is highly noticeable. An important aspect to consider before you start trading in the market is that not all stocks are deemed ideal for day trading. There are certain stocks that are suitable for day trading. Liquidity and Volatility are the two most sought after factors that every trader verifies before making a move. Liquidity allows you to enter and exit a stock at a good price while volatility gives an indication of the expected price range with which the trader needs to operate on a daily basis. By analysing these factors, you should be able to come up with a list of stocks that suit your trading style and preferences. Now that you have your stocks, you need to make an entry. For identifying entry points, you may use any of the following tools;

• Intraday Candlestick Charts –This gives a raw analysis of price action.

• Level II Quotes/ECN – This gives a view of orders as they happen.
• Real-Time News Service This tells you when news comes out. (News are known to move stocks so this could be a good and safe method for complete beginners.)

By using these methods, you should be able to determine the most effective entry point that would give you a good chance for ensuring better performance in the market. Finding Your Price Target The determination of your price target is dependent on your specific trading style as well as preferences. It also depends on your capital reserve that has been set aside for investments. It is important to note here that the investment capital should be expendable and should in no way comprise any portion of your regular expenses. This helps the beginners to understand the nature of risks applicable with which the risks can be monitored in an effective manner. While the entry point most trading strategies for day trading are similar in nature, it is the exit which makes the difference. In most cases, however, you will be looking to exit when there is decreased interest in the stock (indicated by the Level II/ECN and volume). However, you need to determine whether the exit decision is in your best interests. Identifying a Stop-Loss Condition When you use a margin for trading, you expose yourself to greater vulnerabilities than those evident in regular trades. This brings to light the importance of stop-losses in day trading as the spikes in patterns could affect your profits. A good strategy for this is to make use of 2 separate stop-losses which should give you adequate coverage. This includes the following stop-losses.

• Place a physical stop-loss order in accordance to your risk tolerance levels. This will help you to establish an amount that would indicate the maximum expendable amount for you.
• Place amental stop-loss at a position where your entry criteria are violated. This will help you to exit your current position the moment the trade takes an unexpected turn.

As soon as you hit any of the stop positions, just let go of all your trading activities for the day and move away. It would not be wise to trade on that specific day as you would only increase your chances of incurring considerable loss. Analysing and Enhancing Trading Performance Traders try their hand at day trading expecting to make triple digit returns every year with minimal effort. But without the correct understanding and the right strategy, many day traders end up losing money which further lowers their confidence. Before you actually start trading, spend a lot of time finding and calibrating the perfect day trading strategy for you. In day trading, it would be better if you could measure your performance by the extent of adherence that you maintain with you selected strategies. Using your gains and losses to measure your performance would only leave you amidst an inaccurate understanding. It is important for day traders to stick to their strategy despite changes in the market scenarios shifting from their action plan could disrupt the chances for generating profit. A Word of Advice Day trading can be a challenging undertaking, especially when traders have to deal with their emotional inclinations. The most common reason why day traders fail to stick to their action plan is because their emotions often mislead them into making hasty decisions. If you have not been able to develop the right trading attitude, then it is strongly suggested that you invest in a good Robotic Stock Trading Software . This not only makes use of highly effective strategies but it will monitor the market and will make a move every time the conditions comply with your specific rules. Moreover, it gives you a significant leverage by eliminating emotions from the equation. So unless you are pretty confident of your selected strategies and trading capabilities, get yourself a trading system and watch as it generates profits after profits for you.