The Type of Trading That Suits a Laptop Lifestyle
The world of the day trader… it sounds exciting, doesn’t it?
Is it really possible to dip into the market for a fast profit and be done for the day?
If you want to day trade for a living, then you need to have the right mindset. You also need to put in the time and effort on your trading education. I want you to get started the right way.
This guide will give you the information you need to get started. Let’s do this.
What Is Day Trading?
Day trading is buying and selling a security within the same trading day. The pure day trader ends the trading day in a cash position; nothing is held overnight.
Most day trading is done in the stock and foreign exchange (forex) markets, but it could be any market.
For example, let’s say you buy shares in Company X because you expect the price to go up that day.
Then, you sell your shares on the same day. If you did your research and opened and closed your position at the right times, you ended up with a profit.
Day trading is different from buy-and-hold investing and swing trading. Buy-and-hold is just what it sounds like: you buy shares of a stock and hold them because you believe in the fundamentals of the business. You believe owning the stock will give you long-term returns.
Swing trading is similar to day trading. The difference is, you hold the position open overnight or even for several days or weeks. Some day traders make some swing trade plays. I don’t recommend it for beginners, but once you get to know the game, it’s another strategy to use.
Benefits of Day Trading
Day trading is the ultimate laptop lifestyle. You can trade from anywhere with a laptop, trading software, and a high-speed internet connection.
Want to trade sitting by the pool in Bali? It’s awesome. But to get there, you have to do your homework. You can’t cheat success in the stock market.
There are other benefits, of course. You don’t have to go into some office for a J-O-B. You are your own boss and you can start small and work your way up.
Unless, of course, you trade for some big bank… which I don’t recommend unless you’re obsessed with that sort of thing. Not for me.
Life of a Day Trader
Is it true a day trader only works a couple of hours a day?
That’s misleading. There are some dishonest trading coaches out there who push this idea. While it’s true you might only trade for a short time each day, you have to include time for research.
When I was learning, I put in hours and hours every day. I skipped classes in high school and college to research and trade. I call it the hustle and the grind. I hope you’re getting the idea that this is a marathon and not a sprint.
Yes, I have several millionaire students, but they put in the time. They studied their butts off and they keep learning.
How to Become a Day Trader
You might see the term ‘active trading’ as you continue to learn. Active trading is more of a general term. According to Investopedia, it means “the act of buying and selling securities based on short-term movements to profit from movements on a short-term stock chart.”
So, day trading is a type of active trading.
To become a day trader there are some concepts you need to understand. Let’s take a look.
I encourage you when you’re first starting when you don’t have experience, to trade small. You can always get more aggressive later on. The other thing I recommend is to cut losses fast. My student Tim Grittani says to “cut losses intelligently.”
Every big loss I had back in 2003 and 2004 happened when my ego got the best of me. I threw my day trading risk management out the window trying to force trades that weren’t there.
I was so focused on trying to prove myself to attract investors into my hedge fund, that I broke all my own rules. They were near disastrous mistakes.
I don’t just pick any random stock, I want the stocks to prove themselves.
This means I’ve done my homework, I know what the company is about, I’ve searched for news and watched the charts. Technical analysis starts with being able to read a chart.
Stock Market Patterns
One of the most important things I teach is to recognize stock market patterns. These patterns pop up again and again; you can learn to take advantage of these patterns even trading conservatively.
I’m not saying that I’m gonna win every time. Don’t misunderstand me.
It’s a question of preparation. If you know the patterns inside and out you can act.
There are different kinds of software that can help you if you’re getting started with day trading.
Let’s have a look at your options in the next issue.
— Tim Sykes
Editor, Penny Stock Millionaires