Day trading is currently drawing in more and more prospective traders and those who are already active and experienced in financial investments. Day trading basically refers to buying and selling of financial instruments in a time frame of one day. Activities can be made once a day or multiple times a day, depending on the investor’s preferences and investment strategies.
Obviously, day trading, as any other type of financial investment, needs to be approached with caution and careful planning. We will be taking a closer look at some of the suggestions we have prepared in order to help you learn how to efficiently manage your money when day trading.
Stick to the amount you planned on investing
The first step to smart investing is figuring out exactly how much money you can invest in each trade you are interested in. Keep in mind that the smart thing to do is never to invest more than 5 to 10% of your total account balance on each trade. See here how to apply money management rules of thumb with binary options. These rules become a bit more complicated if you start with Forex and CFDs since they include leverage and margin calls.
Another thing that ties to this is setting a surplus amount of money that you actually can afford to spend on investments. This means that you should never pull out money that is intended to go towards you basic living expenses.
If you don’t have time – don’t invest
It is not a big surprise that day trading, or any type of financial investing, requires time. Day trading is probably a bit more specific since you would need to consider that the changes on the market do happen all day long which means that the investment opportunities also happen all day.
Make sure you have enough spare time that you can dedicate to trading without having to do it on your lunch break or while you’re waiting at the doctor’s office.
Use cash only
If you have to borrow money to trade, take out loans or credits from the bank, day trading might not be the best financial option for you at this point in time.
Use only the money that you have as a surplus and money you are prepared and comfortable with potentially losing. This way you are confident that you will never lose money that you do not have or with which you are planning to retire.
Focus on just a few stocks
This is a pretty clear and straightforward tip – do not invest in a massive number of assets. Keep your investments focused on just a few in the beginning so you can give yourself time to learn and figure out what is the best course of action for your investment plans.
Don’t rush into trades
Investors with limited experience tend to place trade as soon as the markets open which is probably not the best ideas if you aren’t really skilled at recognizing patterns and planning strategies.
It’s best to first spend a bit of time just observing and reading the market and when the volatility lessens a bit, you can calmly make your trade.
Stick to your strategy
Financial investing is never about rushing things. Sure, you do need to be able to think fast and make decisions during a very short time frame, but you need to be able to stick to your plan. If you have spent enough time educating yourself and developing a sound investment strategy, you do not want to mess it up by rushing and skipping your carefully planned steps.
Sticking to your strategy means that you will be able to stay cool headed when unplanned things happen. It will help you stay on top of your game by making sure you do not do any impulsive moves since those are never a good thing when it comes to any type of investments. All of your decisions need to be carefully planned and executed for so you could also be able to figure out if you need to tweak you strategy a bit. If all of your trades are placed impulsively, there is no way of knowing what moves could you make to improve your plans.