The idea of quickly turning profits through the stock market can be really tempting and exciting, but it’s a fact that many traders today don’t hit it big. If you’re new to this or are still keen on trying your hand at day training, then this short guide will help kickstart your stock investment the right and the safest way possible.

Understand day trading

You can find countless tips and tricks that will help maximise your day trading profits. However, none will be as important as the tips we’ve set here.

Trade only with money you can safely lose. It’s crucial that you set aside a planned amount of money for day trading and restrict yourself from trading more than that amount or use money for vital life stuff such as mortgage/rent, health, or education.

It’s possible you will lose it.

Start small. This is especially important as you start trading. It’s normal to make mistakes and lose money when day trading. Keep tight reins on losses until you acquire useful experience.

Don’t quit your day job. Would you want to bet your future on luck alone? You need to see how your trading strategy will perform when the market gets rough, in times of a recession or other such incidents. After becoming consistently profitable, only then should you assess whether you prefer to devote more time to trading.

Popular day trading strategies

After finalising on securities to trade, the next step is to determine the most appropriate trading strategy to maximise your chances of trading profitably. You can specialise in a specific strategy as well as combine some of the following typical strategies.

Swing, or range, trading. Traders look for stock that has the characteristic of bouncing around between a low and a high price, also called a “range bound” stock, and they purposefully buy when it nears the low and then sell when it nears the high. Also, they may sell short when the stock reaches a high point, hoping to profit as the stock falls to the low and close out the short position.

Spread trading. In this high-speed technique, a trader tries to profit on temporary and sometimes subtle changes in the market, taking advantage of the difference in the bid-ask price for a stock, otherwise known as a spread. For instance, if a buyer’s bid price drops, the day trader can step in to buy and then proceed to resell at the stock’s ask price or higher, which earns him a small “spread” on the transaction.

Fading. With this, a trader short sells a stock that has gone up in price too quickly when buying interest begins to dip. The trader can close the short position after the stock falls or when purchasing interest picks up.

Momentum, or trend following. This strategy looks to “ride” the wave of a moving stock, either up or down, most often because of earning report or some other news. Traders will start buying a rising stock or “fade” a falling one, with hopes that the momentum will continue.

Bottom line

The execution and general success of these strategies is up to you. Some traders prefer to simply angle for a penny per share, like spread traders, while others may indulge themselves a larger profit before closing a position, like swing traders. Patient traders will be more likely to hold overnight, while others won’t and will want to maintain a neutral position for possible negative news before reacting.

Regardless of the strategy, it’s important to find the best stock brokers in the Philippines has to offer whether you choose a local or an international stock. A good stock broker will give you all the tools, learning and support you need to be successful as a stock broker. It can be a while to arrive to a strategy that works best for you but hang in there because every rich, successful stock broker was a newbie at some point – and look where some of them now.