Preface: This guide to trading online is premised on a solid education. Successful traders understand the importance of learning the ins and outs of the global financial markets. To quote the esteemed William Shakespeare, from Romeo and Juliet, ‘Wisely and slow, they stumble that run fast.’ [Friar Lawrence advising Romeo, the Montague].
Everybody wants to make a quick buck. Why not? It seems that the global transition to the online arena is happening at breakneck speed. Erstwhile financial systems, like brokerages and trading platforms, have been democratized for use by everyday people. Casual traders and experienced professionals alike now fish in the same pond, seeking profits from lucrative opportunities. From a theoretical perspective, there is no reason why Trader A who is a newcomer to the scene can’t unleash the selfsame potential as Trader B with years of experience in the field.
You simply make the trade and collect your profits, correct? It seems simple enough. The reality of successfully trading stocks is a little more complicated. One could draw comparisons to somebody who gets lucky on a single trade, versus a long-term trader who generates consistent profits over time. It’s like day and night. Fortunately, you can bridge this divide through practice, persistence, and pedagogy. 99% of new traders, give or take a couple, are of the opinion that you should hit the ground running, and retire early. For these people, the trading timeline may be a couple of weeks, maybe a month or two.
Reality Check: The global financial markets are an enigma to the best of minds. Whenever you think you’ve got the markets figured out, they will throw you a curve ball. In other words, you never ever stop learning in the markets. Nobody has successfully created a failsafe trading system that guarantees profits. It’s impossible. What is possible however, is an eclectic approach to trading which draws on multiple disciplines, for success over the long term. Stocks analyst, Timothy Sykes believes that day trading should focus primarily on education, not profits. In the next section, we’re briefly going to touch on some topics that should be considered.
How Can You Improve Your Trading Success Rate?
You’ve already taken the first step in your journey towards online trading. Now, it’s important to pick a trading platform and/or brokerage. Sometimes brokers offer trading platforms, and sometimes a trading platform can be paired with your chosen broker. An example of a top-tier trading broker is Stocks To Trade, dubbed STT by those in the know. Of course, the decision to pick a trading platform and/or broker is personal and dependent upon a host of variables. These include your location, your trading preferences, your budget, et al.
One of the greatest challenges that new and seasoned traders face on a daily basis is which stocks to pick. How do you know which stock is rising or falling in price? How do you know which stock has the greatest trading volume? How do you know if a stock has traction in the media? These are all important questions that are best answered with a rather sophisticated trading resource known as a stocks screener.
As its namesake suggests, it screens thousands of stocks that are currently listed on the financial markets, and selects those which meet the criteria. It’s always a good idea to pick highly volatile stocks, since they present with the greatest profitable opportunities to the upside, or to the downside. A stock that has a stable price is not worth trading, since there’s little to be gained.
A stock that rises markedly during the day is certainly a worthy contender for a day trader. Multiple factors impact the price mechanism with stocks. These include news-related events such as earnings announcements, new partnerships, capital investments, breakthrough technologies, geopolitical events, and so forth. It always pays to stay abreast of the latest developments, as they pertain to your chosen basket of stocks.
Currently, the world is writhing through the global pandemic. Companies which present solutions to the novel coronavirus are looked upon favorably, such as specific pharmaceuticals companies like Moderna, and *Regeneron. The latter is a cocktail antiviral therapeutic which binds itself to the coronavirus and prevents further replication in the host.
It also deactivates the virus, effectively allowing for a full recovery. If one were eyeing this particular stock for trading purposes, any breakthrough announcements may have a multiplier effect on the stock’s price. Unfortunately for day traders, the stock is priced at almost $600, making it largely unaffordable.
Rather than focusing on high-priced stocks, you may want to focus on penny stocks as a day trader. Why? These little-known companies don’t have high market capitalization, and they are priced below $5 per unit. They are extremely volatile, and can rise or fall markedly during a trading cycle.
Not every penny stock is worth trading; on the contrary, only a handful of them may survive during their infancy cycle. However, a day trader is not invested in building a long-term relationship with a company, or its stock. Your goal is to understand the market forces which may act upon that stock’s price. With the right forecasting abilities, analysis, and understanding, it is entirely possible to get in early enough to generate a profit and close out the trade.
This expose is intended to whet your appetite for day trading. The actual process is laden with learning, and intense study. When people say that they were educated at the ‘school of hard knocks’, that may well apply to stocks trading. Haughtiness and arrogance have no place in this arena; the market has the capacity to humble even the most powerful traders and investors.
- Why Are Traders Scrambling to Start Trading Online?
- A Brief Overview of What Swing Trading Is and How It Works
- Five Effective Trading Strategies for the Rookies
- The Future of Automated Trading in Forex
- Spread Betting vs Contracts for Difference