Basically day trading is a game of chance

Learn day trading: 7 tips for beginners

Here, as a beginner, you will get 7 valuable tips to learn day trading so that you can safely start with Forex or CFDs.

 

Anyone who wants to learn day trading will find tons of information on the Internet, in books and at seminars from various providers. But where do I start?

In order for you as a trading beginner to focus on the right content, we have compiled important trading tips for you in this blog post.

This allows you to focus on the really important topics, because there are a few to consider. Before we start, you should definitely make it clear to yourself that trading is usually associated with leveraged financial instruments (derivatives such as options, futures, CFDs, FX, ...). The lever has its charm for many, as we will find out later, but it is just as treacherous. You can make a lot of money trading, but you can also lose everything!

So that the latter does not happen, we now start with tip number 1.

 

Learn day trading: Tip 1 - Build up specific specialist knowledge

Anyone who has not yet mastered the absolute basics should take the time to internalize them. If you do not prepare yourself thoroughly for the stock market and especially for trading, you will get rid of your money faster than you can see. You have to be able to answer the following questions if you want to have even the slightest chance in the market. I have written short answers to each, but depending on your level of knowledge, you should delve deeper into the matter.

  1. What asset classes are there? The categories of the individual assets are stocks, bonds, commodities, foreign exchange (FX). There are again gradations in the individual rubrics. In the case of stocks, for example, one speaks of blue chips or small caps, which is based on the size of the trading volume and thus enables different trading strategies.
  2. What is the “market” anyway? The market is a collective term and describes a place where securities or derivatives transactions take place. It is the (virtual) place where buyers and sellers meet and exchange their positions for money. As with car trading, the prices for securities (underlying assets) are determined by supply and demand.
  3. Which market participants are there? The market participants are divided into speculators (you and me), investors, hedgers and arbitrageurs. Hedgers protect themselves or their goods on futures exchanges from strong price fluctuations. Arbitrageurs take advantage of price differences of an underlying asset on different exchanges. Modern computer trading has changed this trading style significantly in recent years.
  4. How does a course come about? There is no one-size-fits-all answer to this question. It is primarily dependent on the respective asset. Shares are traded on regulated stock exchanges such as Xetra. The order book matches buyers and sellers. In foreign exchange trading (FX or Forex), transactions are carried out "OTC", ie over the counter on the interbank market. Derivatives are usually priced by bankers and brokers and are based on the development of the underlying asset (e.g. DAX).
  5. What is a derivative and what is the leverage? The term “derivative” translates as “derived”. In exchange trading, it means that a financial product is derived from an underlying asset. To put it even more simply: the derivative follows the development of the underlying asset. Let's take a CFD on the DAX as an example. If the DAX rises, so does the DAX CFD contract. Whether in a ratio of 1: 1, 1:10 or even 1: 100, the chosen leverage of the trader decides. With the help of the lever, I can achieve very high returns, but also losses.
  6. How can i act? Anyone who not only wants to learn day trading in theory, but also want to practice it, needs a laptop / PC / smartphone, internet access and a trading account with an online broker. The broker takes care of the administration of the capital and the execution of orders.
  7. When can i act? There are fixed trading hours depending on the asset class. Shares can be traded during the opening hours of the stock exchange. Foreign exchange is traded 24 hours a day. However, all markets close from Friday to Monday.

We have brushed up on your basics once again and we can devote ourselves to the next tip.

 

Learn day trading: Tip 2 - Open a demo account

There are various trading platforms with which you can track prices, try out chart technology and ultimately place orders. Which software and which broker you choose depends primarily on the financial instruments you want to trade. For many beginners who want to learn to trade, a free demo account with eniem online broker for CFD and forex trading has proven itself.

On the one hand, CFDs are very transparent in the illustration, can be used for different trading styles and have been exempt from the obligation to make additional payments since this year. In addition, many CFD and FX brokers offer account openings without a minimum deposit. That means you can start your trading experience with little capital. But before you enter a trade with real money, you should definitely practice on a demo account. The following reasons:

  1. You are not risking your own money. Demo accounts are, so to speak, play money.
  2. You practice under real conditions, because the broker's software is the same for live accounts and demo accounts.
  3. You can train until you have a feel for the markets and a finished setup.

Over time, you will find that discipline and patience are extremely important qualities for trading success. Take your time and practice using the demo account. There you can make mistakes without it hurting.

Learn day trading: Tip 3 - find a trading style

There are three different trading styles, which mainly differ in the time component. It follows that different financial instruments are also used.

We differentiate between the following trading styles:

  1. Scalping - Scalp trades have an extremely short holding period. A scalper holds a trade for a few seconds or minutes. It cuts a small movement of a few points out of an underlying asset.
  2. Day trading - Day traders typically hold their positions for a few hours until the end of the trading day. If the intended goal has been achieved after a few minutes, that's fine, of course.
  3. Swing Trading - Swing traders have planned a longer duration for their trade. Swing trades can take a few days to a few weeks.

A well-known professional trader once said: “There are a million strategies for making money in the stock market. But only one of these ways is YOUR way. "

Over time you will find that you are not made for every trading style and strategy. For example, I'm not a good options trader and I can't hold out a trade for long. This is due to my character traits, which influence me (as well as every trader) in trading. But I found out through testing and trying out that I feel comfortable in day trading. My trades run an average of 3.5 hours. Sometimes it only takes 5 minutes.

So you have to find out which time perspective suits you best by testing different styles on the demo account.

Important: I can lose or win the same amount of money with any trading style. There is no better or worse! If a swing trader makes one trade per week and scores 100 points, while the scalper makes 10 trades and scores 10 points each, the result is the same.

 

Learn day trading: Tip 4 - Test your first idea

When you have found your trading style, you will know roughly how many points you want to earn per trade and therefore also how long a trade is likely to run. With this knowledge you are already a lot further than at the beginning, but now the task is to develop a trading strategy based on the trading style.

Here you should get your first ideas from blogs, forums and / or YouTube. Again, you should test various ideas and strategies on the demo account. Then you can see which approach suits you and achieves good results. It is very important that you do not blindly re-trade any promising strategy. As always: It has to suit you, because your character traits, your specialist knowledge, etc. ensure how successfully you put theory into practice.

I have already presented some strategies and setups so that you have a small selection available here:

This gives you some ideas of what a trading strategy looks like. You can expand any of these approaches as you wish.

 

Learn day trading: Tip 5 - Create your trading setup

When you have familiarized yourself with one or the other strategy and know whether you prefer to be in the forex, commodities or stock market, then you can write down your own trading setup. The aim here is to create a set of rules that answers at least the following questions:

  • Which underlying assets do you want to trade and with which financial instrument?
  • Which criteria have to be fulfilled in order to enter a trade (certain chart formations? Fundamentals? News? ..)?
  • When would you NOT trade?
  • When do you end a trade? Manually or with limits such as stop loss and take profit?
  • What time unit is your idea based on? 5-min-chart, 1h-chart, .. (depending on the trading style)?
  • Which risk parameters do you choose? Leverage, position size, ..?

I would like to emphasize once again that this setup has to suit you! Therefore, the same applies here again: Test, analyze, optimize on a demo account. I'll tell you here that the challenge in trading is not to create a successful trading setup, but the permanent discipline to implement it professionally. To do this, there are a few tools, such as the trading diary.

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Learn day trading: Tip 6 - Keep a diary

Some people remember their youth badly when they hear the word “diary”. But this time it's not about documenting his lovesickness, but rather the thoughts and actions of the trading day. After a few weeks, this can be a general amusement, but it actually has a higher meaning.

The complete documentation of all trades gives you a perfect analysis tool. You can use the diary to look back again and again and see whether you have repeated the mistakes of the last week or finally eliminated them. Since we traders tend to recency bias (easy to forget), timely documentation of the trade is essential.

What's in a trading diary? Everything you need to do a proper review. In addition to the result of the trade (in points and / or euros), it makes sense to log the thoughts and emotions. Did you feel comfortable Was the setup crystal clear or did you deviate? If yes why? Would you do the trade again?

You can create the diary in Excel, Word or any other document. Some traders also use a classic notebook. I print out the charts myself, note trade entry / exit, my thoughts, the result and whether it was a trade that corresponded to my setup.

 

Learn day trading: Tip 7 - Concentrate on simple charting techniques

Many traders, whether beginners or advanced, believe that they need to find or develop a super indicator that only signals winning trades to them. That's a waste of time.

Often the simplest indicators are the most promising. As a beginner, you should focus on simple indicators. This includes a moving average on the one hand and simple support and resistance lines on the other.

If you don't yet know how to recognize resistance and support, I have a post for you here.

For example, you can choose a simple moving average or an exponential moving average as the moving average. Many traders use 200 as a scaling. You can also find a separate blog post on this.

These two chart technique indicators allow you to optimize your trade entries and exits, as you can now recognize zones in the chart that are very likely to cause setbacks or trend changes.

These indicators are combined in the following chart. Do you recognize the simple but effective application? Both on the EMA200 and on the individual lines, the course always stops or reverses completely.

By the way: these two indicators are used by various hedge funds and investment banks. And these big boys are the real professionals.

Conclusion:

I have presented you with 7 tips that will not only help you to focus properly, but also provide step-by-step instructions for learning day trading.

You should practice on the demo account until you have developed your trading strategy sufficiently. This means that it has been positive over a period of several weeks. Despite the demo account, you will already gain experience of good and bad trades.

It is also important that you have already found the right risk management parameters in the test phase. This includes choosing the right position size and hedging using stop loss.

If you now open a real money account you will notice that the emotions are added. Your trading will change again. Patience and discipline are absolutely essential. Keep an eye on your true trading setup and document your trades.

Important: If you want to make sustainable money with trading (which I assume), then you need a tried and tested strategy. In our free video training we will show you how to use our Implement new trading strategy (also part-time) can. You can use the following button to select an appointment. Start now:

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Good luck and good trades
Tim