We are in one of the longest and most successful bull market runs in stock market history. As a result, day trading is one of the most popular endeavors for people to try to make some extra income or even develop a career. However, most people fail to realize that trading stocks or any other asset class is a zero-sum game: whenever someone profits, there must similarly be someone losing that capital.
This means that you are playing for keeps every day you trade, and in order to make trading into a tool for financial freedom, you need to treat it like a business. To do this, a baseline education of how to learn and grow in the market is essential. Eager to learn? If so, read our handy day trading 101 guide on how to gain the proper knowledge to start your investing journey profitably.
How Can I Learn to Trade?
While there are true anecdotes about people diving in and becoming market dominators, those stories are marred by survivor bias. What we rarely hear about are the hundreds and thousands of people who invest their hard-earned money because they heard that ‘stocks only go up’, only to find out that isn’t the case.
If you are looking to learn to trade, here are a few key concepts you should consider as you begin:
- Define your trading goal: For most people who own stocks and securities, they are investing in retirement accounts or just buying a stock to hold it for the long term. However, as you get into active trading, you need to decide if it will be a side hustle, extra income, or a full-time job.
While there is no right or wrong answer (it is your money after all), we will emphasize that the wrong way to approach trading is for entertainment and without education. With retail investing exploding through apps such as Robinhood there are those that are now trading for fun, but trading is not gambling. If you want fun, head to your local casino.
- Maximize your learning process: While education needs to be a foundation of your trading journey no matter what, there is not a one-size-fits-all plan for success. Many new traders try to learn from free information, from places such as YouTube or Reddit, or free education on brokerage sites. However, the number of people failing to make money day trading should tell you that this ‘free content’ is simply not enough to be successful. This is a business where you need to build an edge against your competition. This level of competition is important because as an individual retail trader, you are competing with a sea of other people who are reading the same free content as you. It is not about knowledge, it is about developing your skills. Thus, we encourage taking courses, talking with mentors and coaches, and working in live sessions as much as possible to see how you can glean the most. Do you really think the most successful Investment Bank traders and Hedge fund managers go to YouTube for tips?
Treat trading like a business: If you are reading this blog on day trading, we are going to assume you range on the more serious side of trading ambition. Thus, in order to have the best chance at financial freedom via trading success, you need to consider how you are going to put yourself in the best position to win over the long term.
This includes honing your skills in trading via education and smart market decisions early on, but it is not limited to those elements. We also strongly recommend thinking about what your hours of trading are like; do you want to be a day trader, swing trader, or work in alternative markets. Similarly, physical and mental elements outside of stock trading can significantly impact your performance. If you overstress yourself by trading at all hours of the day, neglect nutrition and exercise, and create an erratic lifestyle, there is a good chance you will not make the best decisions.
There are many other micro and macro concepts that you will develop in order to be a successful trader. If you start a thesis with these three, we are confident you will have a much better chance of becoming a consistent trader.
Day Trading 101: Beginner Trading Tips
Once you have locked in your trading mindset, you still might need some quick reminders about the hallmarks of long-term successful traders. Here are some quick pointers that will almost never let you down:
- Never trade with money you can’t afford to lose: Even for the most aggressive professional day traders, capital allocation and common sense are key. There have been countless stories about new (and experienced) traders suffering financial ruin because they tried to hit a home run with a high percentage of their net worth. Your trading bankroll should not be your rent money, and even within this amount, you shouldn’t start by trading more than 1 percent in a single move at once.
- Buy low, sell high: The best trading setups will rely on a variety of tools that let you know a stock has possibly settled at a stable point where it is likely to trend upwards or downwards (we teach how to make money when the market is going up or down). Taking your profits at your target is key. It can be easy to picture the stock skyrocketing past your target and wild profits coming your way. More often than not, however, this will end with a pullback that negates your successful trade. Proof of that can be seen recently in the Gamestop fiascos!
- Do not trade emotionally: Even the best traders will have trades that don’t work out. These can happen because you don’t follow your plan (or have a plan that works), or because the market is unpredictable at times. That’s why consistency is key. Regardless of how a trade pans out, don’t ‘revenge trade’ to make up your losses. Stick to your trade plan and you should profit in the long-term. A concept that the best traders employ is that you don’t work to find trades; the best trades find you. Once you have developed the skills to see clear-cut setups in this fashion, you will be on your way to trading success.
- Trade your plan: Before you enter into a position you must know what your target is. It may not happen exactly to the penny, but there are levels that you should be selling no matter what in both directions. As you gain more experience in trading, you might be able to make calculated deviations, but even the greatest traders are strict about sticking to their setup.
Ultimately, you will find different strategies that work for others that do not suit you. This is why we stress that education is key to understanding the various fundamentals of the stock market. Otherwise, you’re just playing a high-stakes guessing game which is likely to go poorly.
Get Your Trading Education with StockAbility™
At StockAbility™, we aim to provide our community members with the proper education to make trading a tool for financial freedom. If you are serious about learning the ins and outs of the market, we have courses, mentors, and live-training that will help you jump ahead of other traders and into a position of success.
We believe that investing is a skill that everyone should have. It’s your money, your life, and your freedom that you can multiply. Reach out for a free webinar so you can start your journey as soon as possible.