How To Day Trade Online

Last updated on June 16th, 2016

day trading for beginnersThe main theme for those who want to learn how to day trade is they want to make money.

Money comes in different flavors such as wealth producing and income producing and day trading comes under the blanket of income producing.

People want to learn how to day trade online so they can give up their day job or supplement their monthly income from their day job.

It is a dream shared by many people because freedom to do what you want, when you want and with whom you want is something worth achieving.


Hard Truth About Day Trading

The fact is that most people fail at day trading however because most do, does not mean you have to.

No day trading guide for beginners would be complete without stating the observation that day trading is not only risky but can destroy your life.

No matter how or where you learn to day trade, you run the risk of financial ruin and many have done just that.

Can that be avoided?

I think so but it has nothing to do with your choice of markets or the platforms you use.

It has to do with you.

As you learn how to day trade, you must work on you and all the biases we all have that can impact your day trading success.  Fear and greed have been the demise of many people who entered day trading with the intentions to become a professional trader.

There are many resources available for understanding traders psychology and trading in general.  We have put together a superb list of some of the best books on trading here.

It is easy to start to day trading.

It does not require degrees, formal training or those dreaded interviews that most job seekers go through.  It requires capital, a broker and a trading platform.

Trading is simple to learn but is anything but easy.  Basic trading rules and day trading strategies can be found online or in the financial section of any bookstore.

If that was enough to make you successful, the success rate of traders would not be as low as they are.

How to day trade online involves three key variables that you must have a handle on to have at least a fighting chance of day trading survival.


Day Trading Systems

It may seem obvious but when you learn how to day trade online, you need some sort of trading system.  These can range from simple technical analysis understanding all the way to fully-packaged trading systems with proprietary indicators and rules.

trading systems
This chart shows a complete day trading system and as you can see, it is a fairly objective way to trade.

Objective trading means that you have taken your emotions and biases out of the equation.

These types of systems usually come with:

  • Precise entry areas, protective stops and where to take profits
  • Complete and proven trade plans that give you a roadmap to follow in your day trading
  • Indicators that you apply directly to your charts by way of templates
  • You may also get support from real traders as opposed to customer service reps

Technical analysis is based on tools such as trend lines, chart patterns and indicators where you make decisions on whether or not you are seeing a possible trade.

When you learn how to day trade, you generally learn all about this type of analysis of the markets but many fall into analysis paralysis where they have all sorts of drawings on their charts.  You want to make your day trading decisions on as little variables as possible.

When you learn how to day trade, you need to make decisions on what suits your personality the most.

day trading indicators

While this chart looks confusing, it really isn’t.  As a day trading guide for beginners, I wanted to showcase some tools I personally like for day trading.

  • Support/resistance lines so I know where price reacted in the past
  • Trend lines to show symmetry in price movement
  • Fibonacci to measure retracements in the overall trend and give me a location for possible trade action

The green circles show where price bounced but also points out that they turned at areas that technical analysis highlighted before it happened as well as where a confluence of technical tools occurred.

  1. Price bounced at a level of prior resistance and now turned support.  As well, it came into the lower red trend line that forms a channel with the upper red trend line.  Add in the 50% Fibonacci level and we had a strong area to be on alert to
  2. Price turned at a 61.8% Fibonacci level, a trend line as well as a minor support area

There are trend following day trading strategies, range trading and counter trend day trading strategies you may want to investigate.  My personal trading revolves around trend trading which I find a safer more reliable means of trading.


Risk Management

Many people complicate this second variable when it is a fairly basic concept.

Understand that once your day trading capital is gone, so is your trading business.  A day trading guide for beginners should be all about trading conservative and when I started trading I traded extremely small amounts in the range of .25% of my trading account.   I started day trading in Forex so it was much easier to do that with a nominal trading account.

You must set a power of quitting standard in terms of capital loss on the day and per trade.  This is where you will exit each trade and when your losses hit the maximum loss per day.

While you may have a maximum loss set in your trading plan, you must also have the discipline to follow it.

This is where many who day trade fail.

While they may have set a dollar loss amount, many ignore it in the “hope” of making it back the next trade.  It doesn’t happen and most times, you end up losing more.

Every trade must have a predetermined protective stop which is determined by your day trading account size.

  1. Account size of $10000
  2. Maximum risk per trade = 1.5%
  3. Maximum dollar loss per trade = $150
  4. Dow E-Mini $5/point = max point risk = 30

You will lose and sometimes have multiple losses in a row.  Proper risk management will let you weather the losses so you have enough capital left to trade when the storm is over.

Ignore this variable and you can forget about having a trading career. 

Risk management takes priority over the next trade, the “sure thing”, gut feel or a hot tip.  If the risk exceeds your #2 above, sit out of the trading opportunity.


Psychology Behind Trading

I could write an entire book on this topic however I will keep it to the essentials.

  • Discipline.  If you are the person who starts a diet but can’t keep away from the pastry tray may make your trading journey more difficult
  • Expectations.  You will not get rich overnight.  The market does not have to “do” anything

To be fair, just because you eat a pastry doesn’t mean that day trading is not for you.  However, trading is about having set rules and following them.

No professional trader who has had any success will tell you they just wing it.

You must have set rules on:

  1. When a set up equals a trading opportunity
  2. How much to risk per trade
  3. When to manage the trade and take profit or execute the protective stop

Discipline also means not changing your tested rules to suit the present circumstance.  It should mean nothing that a “sure thing” is setting up but does not fall into your trading rules.  Set up a trading plan and follow it.

I say that each moment in the market has a different DNA than the moment before.  Each moment is unique and you must stay present in the now moment.

Expectations must be logical and based on probabilities, not wishful thinking.  You take the trade based on rules and take the attitude of “It may win.  It may lose”.

When you learn how to day trade online, you are entering an arena where the outcome is unknown.  You have no idea if this trade will win or will begin a string of losses.

Thinking that you “know” the outcome can set you up for not only financial losses, but can have you doubt your day trading abilities if you are wrong.  The exact set up that went for multiple points 5 minutes ago can turn around and stop you out the next time.

Having an expectation that you know what will happen leads to this:

Proven Wrong – Blow to Confidence –Unsure of trading rules – Change to trading rules – Reckless Trading and risk taking – Empty trading account – Day Trading career over

Day Trading Guide for Beginners Bullets

  • Make and follow a trading plan
  • Keep focused during the day trading session
  • Never let winning trades turn into losers
  • You CAN go broke taking profits.
  • Take small losses and big profits
  • Don’t add to a losing position
  • Think in terms of probabilities

Remember you are responsible for everything that happens with your trading career.  It is never the markets fault

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