The idea sounds great: daytrade for a few hours every day and never work again. For a few, this is the reality, but unfortunately many a beginner loses a lot of money. This is because day trading is not that easy for beginners. It is a skill. You can learn day trading and become very good at it, but beware of the high risks of losing money.
In this article you will learn all about day trading. We want to help you with a start to learn day trading. It's a start, because as indicated this is a risky activity for which a lot of experience is needed. And that's a good thing, because it can be learned!
Let's get started.
Table of Contents
Disclaimer: day trading has very high risks. More than 80% lose money, as with CFD trading. This article does not contain personal investment advice. Furthermore, we do not recommend day trading, as we only do long term investing and do not engage in speculation.
Daytrade means day trading in assets with price movements, such as stocks and crypto currencies. Daytrade means that you strive for profitability gains on a daily level. Let's take a stock as an example. In day trading, it is important that the stock makes large price swings on a daily level, and that there is enough trading volume. Suppose the stock is at a price of €10 at the opening of the market. You see an upward trend and buy shares for €1000. Then, after a few hours, the price rises to €10.5. This seems little, but it represents an increase of +5%.
Selling at €10.5 gives you a gross return of €50 (5% on €1000). This must be reduced by the transaction costs from the broker (see below). Now €50 doesn't seem like a lot. But suppose you were to daytrade with €10,000. In this case you would realize a gross return of €500 in one day.
The advantage of day trading is that in a short period of time a lot of money can be earned. The disadvantage of starting day trading is that it is extremely risky. It sounds simple, but it isn't. Suppose you lose 10% on €1000. You now have €900. In this case you need not 10%, but 11% profit to break even at all. And if you lose a lot of money, like -50% then you need at least +100% profit to break even.
The downside loss outweighs the potential profit, and this is the reason why so many novice daytraders lose money.
Yes, a successful day trader can make a lot of money, but not so much in the short term. Also day trading should be seen as a long term plan in which you strive on a daily level for an average higher profit than what you lose.
One of the best tips for starting day trading is choosing the best brokers. After all, day trading leads to high transaction costs. After all, you frequently buy and sell on a daily level. Because of this, transaction costs (commission) can quickly and highly increase.
The best brokers are specialized in day trading, and they also offer the necessary trading tools like Trader Workstation, MetaTrader4 and MetaTrader5 platforms. These kinds of tools are specifically designed for day trading. Think of the necessary charts, trading signals, et cetera.
Tip: starting with day trading is super risky. At least 80% will lose money. That's why it is of great importance to first practice a lot on a free demo account. On such an account you'll get fictitious (fake) money to test your strategies. Below are three suggestions for examples.
We have a preference for the following best brokers for day trading:
Click here for a free demo account at eToro (USA only)
Click here for a free demo account at NAGA (Europe only)
Anyone can learn to daytrade. However, do not underestimate it. Day trading comes with high risks and is therefore really a trade. It is much more difficult than long term investing in shares or real estate. With daytrade every mistake is punished rock hard. You have to learn how to cover your risks and increase your profit opportunities. And that every day.
There is a lot involved in learning day trading. You should become very advanced in technical analysis. Think about reading charts, such as up and down trend movements, candle sticks and support levels. You also need to understand momentum. Cyclical movements take place at the macro level. At one moment, for example, commodity shares are in demand and the next moment technology shares. What you don't want to do is trade against the trend. In addition, you need some skills, such as working with limit and stop orders.
Anyone can learn day trading. Even beginners can successfully daytrade. But given the high risk it is unwise to start on your own. Our advice is to first follow a good course. We do not offer these, but there are some good and reliable courses.
Day trading in crypto has an advantage over shares. This is because with stocks it is important to look for sufficient trading volume and price movement. With crypto currencies it is easier to find this, since cryptos fluctuate much more strongly (in price). For example, with crypto price increases and decreases of 10% are not uncommon. This means that an experienced crypto trader can achieve a much higher return thanks to day trading in crypto currencies.
Read more about crypto trading tips for beginners here.
You can learn day trading in crypto. Just make sure you do this first with fake money through a free demo account. Don't start practicing with real money, because the chances are very high that you will lose (everything). At both eToro and NAGA, they offer many crypto currencies with corresponding tools to trade. Other providers are also a suitable choice, but we have no experiences with them.
Click here for free demo account at eToro for practicing day trading in crypto (USA only)
Click here for free demo account at NAGA for practicing day trading in crypto (europian only)
Day trading in forex means trading in currency pairs, such as the dollar-euro. On a daily level you can trade in such a currency pair. For instance you bet on a rise of the euro in relation to the dollar. If you are right you will realize returns.
The advantage of daytrade in forex is that it is a defined area. There are a handful of popular currency pairs in which you can specialize. This makes it possible to become a specialist. Consider the currency pair EUR/USD. Specialize yourself in the market movements that cause the euro to fall relative to the dollar, and vice versa.
The downside to forex is that it is less predictable. There are many factors that influence the price movement of a currency. No one can predict monetary policy exactly. And because of this, the risk of losing money increases.
Read all about starting with forex here.
There is a crucial difference between day trading and investing. Daytrade is a form of speculation. You buy an asset (stock, crypto, forex) because you expect it to rise in the short term. You sell at a profit, or take a loss, in the short term.
Investing has nothing to do with speculation. In investing, you take calculated risk based on careful research. You analyze companies on the basis of fundamental analysis. This means you look at the intrinsic value (how much is the company worth) and its future earnings growth. In this way you filter out good from worthless companies. Then you invest for the (medium) long term in these good companies. You hold on because, based on your research, there is a significant chance that the company will grow in the long run. And if it grows profitably in the long run, the stock price will rise.
Day trading can be learned. It's a skill. But it is a high-risk skill. Investing can also be learned, and does not contain risks either. But investing has much lower risk than day trading. When investing, you only invest in the best companies. Thanks to diversification and patience, your capital can increase significantly over time. The chance of making a profit is much higher than with day trading, but it does go slower.
Read all about investing in stocks here.
Let’s talk about how to day trade as a beginner to become successful. Successful day trading as a beginner requires a basic understanding of terms, strategies and tactics. Below we will handle some basic tips to start with. Then we will examine tips about how to day trade successfully as a beginner.
Successful Day trading is adopted with the intent to earn a few pips daily to mobilize the income stream. This is one of the trading techniques with respect to the timeframe that has been known for a long time. Since day trading is performed on volatile markets, there were always be high risks.
To become a successful day trader, it is important to begin with some basics. Get the basics right. Avoid big losses. And become a successful trader in stocks, forex, crypto, or whatever you desire. However, keep in mind that short-term trading is always riskier in comparison to other investing styles (such as long-term investing). We advocate long-term investing because it increases our chances to become financially free without taking absurd risks.
Before pursuing your career in day trading, you must learn how it works. Online trading itself is a highly risky business. Learning from the experiences of top-notch investors may somehow help you in building your day trading mindset.
In the era of social media, people need instant results, and the hunger for appreciation has risen too much. This has altered people's approach, and they don't like to invest time in learning. Adopting a good trading course may work for you only if you properly learn and adopt every gain in a real trading scenario.
Above we have already mentioned the best day trading courses for beginners. Scroll back and learn from them.
Once you have enough knowledge of day trading, apply what you have learned on demo accounts. Practicing your trading strategies on demo accounts won't cost you anything except your time. It is better to lose fake money than real money on real trading accounts. Many brokers offer demo trading accounts.
Day trading is a sea as there are tons of pre-settled day trading strategies. It is hard for you to grab every trading strategy and practice it in a demo account. It is time-consuming, so to reach your goal of day trading, start with the one that is understandable for you. If you are into the forex market, filter out your 2-3 currency pairs and try them out.
Even a single strategy is fine for your life. Once you grab a day trading strategy as a beginner, work on it and try to improve it day by day. Always look for possible alternatives within a strategy and practice them on the demo account. Reapply for what works for you, and you will surely improve strike rates.
Emotional soundness is the key determinant of whether you will be a successful day trader or not. Making a strategy, building a trading plan, and sticking to it are difficult tasks every trader faces during their career. You open a position and get panic if it goes against your direction; you close the trade with the fear of loss, and it's all gone. It would help if you stick to your plan and manage your financials to avoid day trading mental trauma.
It's time to start practicing, planning, and building a trading strategy when you've decided what you'll be trading and have your equipment set up. Here are a few points to help you get started and minimize day trading risk. By minimizing risks, you will automatically become a more successful day trader. Especially as a beginner, it is crucial to avoid big losses.
Begin with lower sums of money that you can afford to lose when you start day trading. For example, depending on the type of trading you've selected, you could wish to start with a small amount.
You don't want to lose the money that you need to meet your basic living needs since many day traders lose money when they first start out. When you watch the money that you can't afford to lose, it may be stressful and lead to poor judgments.
A limit order enables you to fix a predetermined price for buying or selling. A limit order to buy is executed at the limit price or lower (to ensure that you do not pay). A sell limit order will be executed at the limit price or higher (to ensure that you do not lose too much money).
You place the order with your brokerage. When the stock hits the price you choose, the deal is automatically closed. This might prevent you from experiencing high losses.
You do not have to trade all day as a beginner. Trading two to three hours per day will most likely result in greater consistency. Successful traders only make a few successful trades each day:
When you first start out as a day trader, you want to become successful. Because of their low prices, penny stocks may seem appealing. As a beginner, you might think to get rich fast and easily with penny stocks. However, they might be difficult to trade fast, making them unsuitable for day trading. They may also be abruptly delisted from major stock exchanges if their price falls too low. These stocks should be avoided unless you are a highly experienced day trader.
To become a successful day trader, it is more a fact of avoiding big losses. Focus on incremental gains. One gain per day will make a major difference!