If you are looking to grow your wealth by buying and selling stocks, you are not alone. We are currently in the midst of an unprecedented retail investment boom, with more and more people buying and selling shares and securities from their own homes every single day.
There are many ways to being smart investing, one of which is to become a stock day trader. As the name suggests, a stock day trader is a private individual who buys and sells stocks multiple times during the same trading day, often to capitalize on small price movements with large positions.
To become the best day trader, you need to know the essential tricks of the trade, as well as the common pitfalls to avoid. With that in mind, here is your brief guide to becoming the best stock trader you can be.
1. Use a Licensed Broker
When it comes to financial investments of any kind, you should always use a licensed, trusted intermediary. For stock trading, this means used a licensed and approved broker with a good reputation.
Remember, individual traders can rarely get direct stock market access, at least not without huge costs attached. By using a smart investor platform like www.monexsecurities.com.au/, you can ensure your finances are safe and that you can buy and sell stocks exactly when you want.
2. Meet the Requirements
Being a day trader is not as easy as just setting up an account. You will need to make sure you meet all of your country or territory’s legal requirements for day trading, otherwise, your investments could be subject to criminal proceedings.
For example, the US requires “pattern traders” to have at least $25,000 in available investment capital. Meanwhile, some countries ban day trading in certain contexts, such as shorting or via CFDs. Know the law before you trade.
3. Know the Risks of Being a Stock Day Trader
To be an effective day trader, you need to know the risks attached. While the rewards can be immense, so can the losses. Many day traders meet their capital requirements by trading on leverage, which is essentially borrowed money from a broker.
When you do this, there is no limit to what you can lose. In addition, day trading is inherently volatile, as this is the only way to make any money. Always be aware that, with volatile financial products, your luck can change in an instant.
4. Understand Market Sentiment
To trade effectively in any market, you need to know what swings market sentiment. This is what drives the value and price of any financial asset and it is affected by many things. If you are trading stocks in energy companies, look at correlating factors such as oil prices or Middle East politics.
Look to the policy announcements of the Federal Reserve if you are trading in blue-chip financial stocks. When buying gold, check the political headlines, as crisis always drives gold up. You get the picture.
Pave Your Road to Financial Freedom
If you can follow these very basic tips, you are already a better stock day trader than 90% of beginners. For more practical tips to help you pave your way to financial freedom, we have got you covered. Make sure to consult our dedicated Financial guides for smart advice on modern money.