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How to Day Trade Successfully in 2023
Be forewarned, it takes a lot of time, effort, and focus to develop the skills necessary for successful day trading. Eighty percent of traders give up in the first two years because they lose money.
Find out how to join the other 90% of traders who make a living via day trading with the help of this comprehensive tutorial.
The good news is that dedication and preparation pay off in literal dividends.
Table of Contents:
- AvaTrade Day Trading App
- What is Day Trading
- Step 1 – Figure Out Your Trading Style
- Step 2 – Create a Tactic
- Step 3 – Know What’s Trending & Moving
- Step 4 – Know the Risks
- Step 5 – Consistency is Key
- Guide to Success in Day Trading
- Tactic 1 – SCALPING
- Tactic 2 – MARKET BREAKOUTS
- Tactic 3 – SWING TRADING
- Tactic 4 – MOMENTUM TRADING
- Tactic 5 – REVERSALS
- Tactic 6 – POSITIONS
- Getting Started Day Trading
AvaTrade Day Trading App
Favourite trading tool for a busy day. 🌞
- Collaborative trading
- Shared user data
- Extensive and varied selection of securities
- Learning Online
- For beginners, it’s not as easy to use as eToro
Reasons to choose this provider ❤️
While not as well-known as eToro, this platform is perhaps better suited to serious traders. AvaTrade is a more advanced platform, yet it may be used for day trading.
On the other hand, it offers a broad selection of interfaces to connect to the internet. Together with its own AvaTrade platform, it supports the popular MetaTrader 4 and 5 trading platforms. They’re both compatible with Apple’s iOS and Microsoft’s Windows operating systems.
There is no need to download or install any additional software to make use of this day trading tool; all you need is a web browser. If you want, you may also use the app.
What to expect 📕
Please spare a few minutes to familiarise yourself with AvaTrade’s mirroring and copying capabilities. You can integrate AvaTrade with both DupliTrade and ZuluTrade.
While I agree that professional traders (Beginner’s Trading Guide) should not attempt day trading, I feel compelled to mention that eToro’s copy-trading integrations are simpler to use for novices. If you’re interested in social trading, you can pretty much just use that one platform.
According to our most up-to-date statistics, the following are some of the most actively traded stocks on AvaTrade:
- ✅ Tesla
- ✅ Amazon
- ✅ Netflix
- ✅ Apple 🍏
- ✅ Goldman Sachs…and more.
What is Day Trading? 💵💨
It all began in a medieval marketplace… 🏰
Any fishmonger will tell you the importance of being on the ball each day, to make enough margin on produce to profit. But the modern term “day trading” is used to describe the practise of acquiring and selling of securities inside a single trading day mostly online.
While not limited to them, the and stock and foreign exchange (Forex) markets are where day trading is most often practised.
Day traders that are consistently profitable often have extensive experience and, more importantly, access to substantial financial resources. Most intraday traders devise tactical plans to capitalise on short-term price fluctuations in liquid markets.
This sort of investor has excellent short-term market timing and the ability to anticipate news that might potentially affect prices. The market may be affected by scheduled news releases of economic data such as GDP, interest rates, and other economic indicators. Day traders attempt to predict the market’s movement and profit from that prediction.
Step 1 📕 – Figure Out Your Trading Style
Before you start trading❕
Before you even consider dipping your toes into trading, you should learn as much as possible about the industry.
There isn’t any easy way to achieve success. Before beginning trading, keep in mind the following: Do you sense opportunities where others perceive danger, or are you more impatient than a farmer tending to his fields?
Your trading personality will be reflected in the approach you choose. According to the ancient adage, stock markets are an expensive place to discover who you are if you don’t know who you are.
Get your bearings, and then go off on your own.
Step 2 📗 – Create a Tactic
It takes a long time to get up to speed. 🏎️
In the financial markets, day traders almost always come out ahead.
Swing trading, arbitrage, and trading the news are just a few of the more popular day trading tactics. To ensure consistent earnings and limited losses, traders fine-tune their tactics.
Instead of coming up with their own methods, most novice day traders choose to use those that have already proved successful. After mastering a technique completely, you may adjust it to your liking.
If you’re going to join the market, do it with a plan that makes you feel confident in your setup and methods. Instead of trying to get the most out of many systems at once, you may focus on mastering just one to maximise your learning and development.
What is our recommendation? Try not to be overly spread thin. Given that there is no “one size fits all” approach to trading, you should instead pay attention to the methods that work best for you.
Step 3 – Know What’s Trending & Moving
Day traders stay ahead… 📰
While news releases may be a lucrative business opportunity, having access to reliable news sources is crucial. To provide just a few examples, all trading rooms have access to the CNBC news releases, Dow Jones Newswire, and programmes that scour news sources for noteworthy releases.
The secret to always being one step ahead of the competition is to constantly monitor market conditions.
Technical analysis 📊
If you’re serious about trading, mastering technical analysis will give you a significant edge. After you have it, you’ll be able to use it to recognise market trends and capitalise on openings in those trends. It’s risky to go into day trading without a firm grasp of technical analysis.
Several brokers have analytical tools integrated into their platforms, which is quite useful for day trading. In the event that your favourite broker does not provide any technical analysis tools, you may pick from a wide variety of pre-built and user-created options on the widely used MetaTrader4 (or MT4) platform.
Why is it crucial to have analytical software?
For instance, technical indications like channels, flags, Elliot Wave patterns, and others may be located with the use of automated pattern recognition. Common in analytics software is a function called “backtesting”, which shows traders the historical results of a trading strategy they are considering.
Step 4 📘 – Know the Risks
The 1 per cent rule stops you losing it all.
When it comes to day trading, mastering risk management is perhaps the most important ability. It’s important to be aware of both trade risk and everyday risk.
Your level of trading risk indicates the maximum amount you are prepared to lose on any individual deal. Traders seldom put more than a per cent of their capital at risk on a single transaction. To do this, choose your entry level and set a stop-loss order to close the transaction automatically if losses exceed a certain threshold.
Trade risk is proportional to the amount of your position in the market, so keep that in mind. Never risk more than 1% on a single trade, regardless of position size, entry price, or stop-loss level.
DAILY HAZARD 💣 💥
A transaction’s risk is associated with that specific deal; a day’s risk is associated with the trading session as a whole.
For this reason, you should know how to establish a reasonable daily loss cap. Traders often make the choice to restrict their exposure to risk each day to no more than 3 percent.
Reasoning behind this is that if you risked 1% on each transaction, you would need to lose three or more times before you reached the 3% cap. If your trading technique is solid, this shouldn’t happen frequently. After you hit the daily limit, you should probably cease trading for the day.
Taking emotions out of your investing is a common way to lower the chance of making costly mistakes.
Step 5 – Consistency is Key 📙
Whether you’re just starting out or are a seasoned veteran, consistency is key in day trading. Consistent trading may be achieved by focusing efforts on the market at around the same time each day.
Although some investors prefer trading between the 9:30 a.m. to 4:00 p.m. EST (Monday through Friday) session, others prefer trading at other times. While trading hours are flexible, certain markets may be more active at specific times.
So, let’s examine the top investment categories and the optimal times to trade them:
Ideally, you would trade stocks during the first two to three hours of the trading session and the final hour of the session.
The first two hours of trading are the most dynamic since they include the biggest price swings and the highest potential gains. Large price swings are not uncommon in the last hour of trade, from 3 to 4 p.m.
Stock market indexes like the S&P 500, FTSE 100, Dow Jones, DAX 30, Nikkei 225, and others are the focus of index trading.
The indexes market is more volatile when political events, big news releases, and other things that impact corporations in a certain sector occur, since such indexes track the largest companies in the globe.
The EUR/USD and USD/JPY currency pairs dominate Forex trading.
Forex’s busiest hours are between 1 AM and noon EST, when the New York and London markets are open, and between 7 AM and 10 AM EST, when the greatest price swings tend to occur.
An increasing number of people are engaging in day trading using digital currency. Cryptocurrencies are well-suited to day trading due to their high trading volumes and volatility. Ethereum, Bitcoin, Ripple, Litecoin and many other digital currencies are widely traded on day trading platforms.
If you want to be successful at day trading cryptocurrencies, you need familiarise yourself with blockchain technology before you start trading.
Guide to Success in Day Trading 🗺️
While engaging in day trading, keep the following in mind:
- Have a reliable trading plan that specifies your trade’s entry and exit locations and a sensible method for managing your risk.
- Day trading is a business that demands you to devote a lot of time, effort, patience, and discipline, therefore treat it as such.
- Learn which trades are worth the potential reward and which ones aren’t to keep your money safe.
- Implement stop-loss orders routinely. This will ensure that you always have an out of any deal.
- Limit your daily risk exposure and your trading activities.
When you start to become emotionally invested in the market due to losses, it’s better to call it a day and avoid making any further trades.
There are several trading tactics that are standard fare and found in the arsenal of every investor. Get started with day trading with these six of our favourite strategies:
Tactic 1 📕 – SCALPING
Modest price changes are capitalised on.
The term “scalping” refers to a trading method in which even modest price changes are capitalised on. This approach to trading is predicated on the premise of initiating several trades with the goal of achieving modest gains.
Due to the trader’s limited time investment of just a few minutes every transaction, profits will grow over time. Typically, a scalper will risk no more than 5 pips on a trade and aim to make a profit of 7 or 8 pips.
While engaging in scalping, it is done on shorter time frames, often between 1 minute and 15 minutes. In the EUR/USD 15-minute chart, the trader is looking to sell on a break of the 100-moving average (MMA). In this approach, the trader would have completed three profitable deals while spending no more than a quarter-hour on each.
Tactic 2 📗 – MARKET BREAKOUTS
Asset price goes above/below a key support/resistance level.
In contrast to range trading, breakout trading seeks to increase trade volume. A price “breaks out” when there is a significant rise in volume and the asset price goes above or below a key level of support or resistance. This causes the market to trend upwards or downwards, providing profitable opportunities for traders.
You’ll, for instance, see the price action trading down when the buyers’ efforts to rise higher are being capped by the falling trend line.
The downward trend, however, is interrupted by a break that ushers in a new upward trend. In order to profit from the expected price increase, traders should set buy stops above the trend line.
Tactic 3 – SWING TRADING
Profit from support-to-resistance price fluctuations. 💹
Of the many trading methods available, swing trading is quite prevalent. The goal of swing traders is to make a profit from price fluctuations that occur when the market moves between resistance and support levels.
Swing traders are somewhere in the centre of the spectrum between long-term and day traders traders. They usually don’t move from one spot for at least 24 hours, and sometimes not for as long as three weeks.
Let’s say Tesla’s share price falls before rebounding off support and shooting upwards. Swing traders will attempt to profit from a downward trend before purchasing at support and riding the reversal until the market gives more indications that the trend may be reversing.
Tactic 4 📕 – MOMENTUM TRADING
Take advantage of trending price movements.
Trading with the momentum of the market is a method used to take advantage of price movements. This investor doesn’t care as much about how the market performs in the long run. In contrast, momentum traders invest in an uptrending investment and sell during a downturn.
Let’s say gold prices seem to be on a long-term rise. When the green line of horizontal resistance is breached, trend followers will “ride the trend” until a reversal signal is given. Their stop-loss and take-profit orders will reflect their risk tolerance and trading preferences.
Tactic 5 📗 – REVERSALS
Capitalising on changes in the trend’s direction.
Changes in the trend’s direction are referred to as reversals. The dominant side of the market can no longer steer price fluctuations in the desired direction.
As a consequence, the opposing side in the market is capitalising on this weakness to reverse the current trend. As a result, the goal of reversal trading is to profit on the reversal of an existing trend.
Imaging the price of Apple shares is rising in a strong uptrend. Those who trade reversals look to Fibonacci extension lines to pinpoint the location of the next potential resistance level. Traders are watching for a possible reversal of trend in order to profit on a break over a Fibonacci extension, a significant level of resistance.
Tactic 6 📕 – POSITIONS
Modest price changes are capitalised on.
A trader who engages in position trading does so in the hopes of making money over the course of many market cycles. This is why position trading is often linked with large financial institutions with a focus on long-term profitability. In contrast to day trading or “scalping”, this approach has a longer time horizon.
Typically, position traders develop trading strategies after considering the effects of macroeconomic and geopolitical issues. For instance, this year’s COVID-19 epidemic may have worsened the global picture, leading some position investors to elect to buy in gold.
Getting Started Day Trading
Step-by-step summarised. 👞
After you’ve mastered the basics of day trading and spent some time perfecting your trading strategy and studying technical analysis, you’ll be ready to put your knowledge to use.
Day trading requires just five simple actions to get started as a beginner who isn’t doing this seriously:
1. CHOOSE A TRADE
Learn the ins and outs of making money in a certain market you believe would fit your requirements. One’s ability to adjust to a new market is enhanced by familiarity with a previous one. The Foreign Exchange market, indexes,equities, precious metals, cryptos, commodities, and more are all viable options.
2. CREATE AN APPROACH
Having only one winning approach for day trading is sufficient. After you’ve adjusted it to your liking and seen success, you may use it again and again. Your trading plan, whatever one it is, must create profits and provide you a way to determine when to enter and leave the market.
3: GET A BROKER
Finding the best broker is the next step after deciding what you want to trade and developing a trading strategy. You should choose a broker who excels in the field in which you want to work. Your broker need to match your trading wants like a fine glove.
4. TRY IT OUT WITH A TRIAL ACCOUNT
Beginner traders, in particular, should use a trial account to hone their trading skills. Demo accounts are used by seasoned traders alike who want to test out new tactics without putting their own money on the line in a live trading environment. Keep in mind, too, that a demo account can’t really replicate the market since it doesn’t include the same level of emotional stress that real-money traders face.
5. EXPERIMENT WITH REAL MONEY IN A LIVE TRADING ENVIRONMENT
When you have gained experience and confidence, you may make your first real-money deal. Keep in mind what you’ve learned from your sample trading and do your best to put it into practise on the real market. That way, you may trade with less of an impact from any unpleasant feelings you might be experiencing.
Where a day trader pays taxes depends on where their “tax residence” is. Additionally, tax regulations have not entirely caught up to a popular item like Bitcoin since it is so new; is it a money or a commodity?
The method of taxation that applies to you may also vary according to your unique set of circumstances. In the United Kingdom, for instance, the HMRC is known to take one of three approaches to day trading:
- ❎ Profits from day trading, which are speculative and comparable to gambling, are likely to be exempt from federal income tax, corporate tax, and capital gains tax.
- ☑️ Extensive profit-making as a sole proprietor most likely must pay business taxes.
- ☑️ Profits and losses from a private investor’s significant activity would be subject to the capital gains tax system. It is verya prohibited and might result in severe financial penalties to pay just company tax.
You might land in any of the three buckets due to the ebb and flow of day trading over the course of a few years.
Although a licence isn’t required, it is essential that you keep close tabs on your transactions, consult with tax professionals, and file your returns in accordance with all applicable rules and regulations.
Takeaway 📚 🤠
Day trading is the practise of purchasing and selling securities on the financial market in the course of a single trading day. If many high-probability market chances arise during a single trading session, day traders are likely to initiate and exit positions multiple times.
Technical analysis techniques including pivot points, moving averages, oscillators, Fibonacci, etc. are often used by these traders. Day traders often use a variety of tactics, including scalping, swing trading, breakout trading, momentum reversal trading, and position trading.
As a general rule of thumb, a day trader shouldn’t risk more than 2% of their trading capital every day.
Common questions about how to start day trading in Australia in 2023…
1. With day trading, how much capital do you need?
The answer to this question is largely dependent on whether or not you intend to use day trading as your primary source of income. How much money do you want to earn daily, and how much money do you really have to start day trading, are two questions you should ask yourself while making this decision.
2. With day trading, is it possible to earn a living?
Of course, but there are a few caveats to keep in mind. Picking the right market is crucial since each market has its own advantages. The stock market requires the highest investment money of any market, therefore small-scale day traders often focus on the foreign exchange (FX) and cryptocurrency markets instead. Furthermore, your capacity to reinvest your profits is proportional to the size of your starting capital.
3. What is your expected salary?
You probably prioritise the potential for financial gain when weighing the benefits and drawbacks. Everyone has heard the tales of self-made billionaires who got their start in the markets with just $1,000 and eventually became day trading millionaires. Of course, there are exceptions; but, the truth is that pay gaps may be quite large.
To be successful in day trading, you need to have the dedication, self-control, and plan to make consistent profits. The many topics covered above may be explored at length.
Is day trading effective then? That may work for you if you’re prepared to put in the effort.
4. What’s needed to begin day trading?
In order to enter the day trading market, what do I need to have? Learn the basics of technical analysis and the language used in trading on a daily basis first. The next step is to create a trading strategy that has been tested successfully on a virtual trading platform. Lastly, put your money where your mouth is by investing it and working to hone and fine-tune your trading method so you can reap long-term rewards.
5. What assets are on the table?
Day traders can make bets on multiple markets and in a variety of ways. Day trading on the S&P 500 entails buying and selling stocks from major corporations like Tesla, Facebook, and Microsoft. You’ll be dealing in currencies like the Euro, US dollar, and British pound during your day trading on the forex market.
Index funds are commonly mentioned in today’s financial advice, but their sluggish nature makes them unsuitable for day-to-day trading. Nonetheless, they are excellent investments for the long run.
Daily traders are also beginning to show a lot of interest in digital money. Trading digital currencies like Bitcoin, LiteCoin, Ethereum, and others on a daily basis is a growing industry. Day trading in cryptocurrency could be a fascinating opportunity due to the high degree of volatility, rapidly expanding trade volume, and general lack of predictability associated with the market.
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