Day trading is the practice of buying a stock and selling it within the same day. There are several key factors to consider before starting this type of activity as your goal is to minimize risks and maximize gains in the process. Please see our day trading risk disclosure.
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Risk Management
The first thing that you must determine before you start trading is how much of your account you are willing to put at risk. In general, never risk your full account value and set a defined percentage of your capital for each trade. Losses are part of trading and your goal is to ensure your funds don’t run out. Determining this amount is essential for proper asset management so that you don’t risk losing too much if your trade goes south.
The amount of money you have set aside for trading can also help you determine your entry points and exit points, and guide you on how feasible the trade is. Understanding the risks before a trade can guide you in the right direction. Especially if you are a novice trader, starting with small share sizes can help set you up for long term success.
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Invest in the Right Software
Trading is extremely fast-paced and requires that you make fast decisions and think on your feet under pressure. To give yourself the best chance of staying competitive, it is essential that you invest in a professional trading platform that offers actionable insights. The best programs give you access to real-time data across markets, with advanced charts and tools that identify equity pools and tap into them quickly with alerts and hotkeys. For more information on available professional grade platforms see our platforms page
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Choosing Stocks
Smart investments essentially rest on how to choose the right stock. This step can be made less complicated with the right software, as the program will guide you on valuable opportunities based on data like moving averages, candlestick chart patterns, spikes in volume, and more.
However, if you are a beginner, you may consider focusing on one strategy first and practice it on a platform that offers a paper trading account. This way you can improve your skills and make as many test runs as possible before using your own funds. As in any skill, practice helps to identify errors and fine tune a skill. Research and learn the various market sectors and learn to understand level 2 or time and sales information as it will be part of your daily process. Learn to trade stocks that are followed by analysts as these names usually have higher daily volume and provide greater opportunities to learn from.
These are just general guideline, but having access to an advanced software and a professional market access broker is critical in executing your trades.
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Know When to Trade
In addition to focusing on the right stocks, successful trading also depends on getting the right timing.
For starters, there are certain times that may be better than others. For example, seasoned traders often take advantage of the price volatility that occurs as soon as the markets open. For novices, on the other hand, you may be better off observing patterns during the first 15-20 minutes and let the environment guide you before making any trades.
Knowing how to time your trade can help you take the most advantage of trading opportunities. However, trading opportunities can arise any time during the day, which is why having a software with hotkeys and a broker that offers easy locates can be an asset.
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Refer Back to the Numbers
Trading can be somewhat exhilarating and it can be easy to get caught up in the moment and make impulsive trades. However, keeping your cool and having rules and systems in place that you follow and adhere to will allow you to think rationally during a trade. Professional software programs can also act as a guide on how to trade effectively with insights based on historical data as well as dynamic real-time market reports and chart analytics.
Set Yourself Up For Trading Success
At CenterPoint, we offer the products, tools, and services that can support your active trading goals. Gain access to several exclusive customized routing options, extensive easy to borrow lists, flexible commission plans, and a knowledgeable trade desk. Contact us today with your questions and experience a higher level of trading.
