How To Get Started In Day Trading

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Day trading can be a good way to diversify your portfolio but it is very risky -- so one of the first things you need to decide if you want to start day trading is how much money you are willing to risk as most day traders actually lose more money than they make.

However, with the bigger risks usually come bigger rewards, so if you want to try your hand at day trading it is worth planning very carefully. If you have any experience at all of day trading, compare your performance to that of key market indexes -- if you cannot match at least minimal standards, then it would be very foolish to consider day trading.

Most day traders start with just a few specific stocks on any one day to minimize risk and they trade very intensively. You should be prepared to make a lot of small trades and set a limit if you don't want small losses to become big ones! Remember you need a high percentage of wins to recoup your expenses and make a profit.

So, with a stern warning about the high-risk nature of day trading, how do you go about it?

What do you need to start?

The first thing you need to do if you are considering day trading is to learn as much as you can about it. There are several good companies which will offer online training sessions and it is important to spend some time looking around for a program that will suit you personally. Once you find a suitable training course, stick with it and get lots of practice before you actually start trading.

You will need to keep your eye out for opportunities and carefully assess what's going on in the market. Look for mergers and acquisitions and so on and take your time when it comes to making decisions on what stock to buy.

Try and get the mentor -- someone who is successful at day trading and would be willing to let you shadow them for a while so that you can learn the ropes. If you can afford it, consult an experienced professional and learn all you can from them.

The best way to trade is through an online site rather than having to call a stockbroker to buy and sell. Online trading sites charge a fee for buying and selling, but it is a much easier way to trade.

Once you feel ready to start trading, you will need to put some money aside -- around $2,500 at least will be needed to establish a margin account with most brokerages. This may be considerably higher in the future if some regulators have their way.

Practice for at least a few weeks with paper trading until you are winning consistently. This is well worth the effort and will increase your chances of making, rather than losing real money. Keep a record of your trades and analyze the outcomes -- understand what has worked and what hasn't so that you can avoid making mistakes and continue to do the things that are successful. Remember that day traders tend to spend a lot more time at it than people who are just investing in stocks -- this is because of the dramatic fluctuations in the market and the short term nature of day trading.

Once you start trading, try swing trading for a while before you go on to day trading. Swing traders hold stock for longer, usually several days or weeks. Also, limit your real trading money to $3,000 or less and be prepared to lose money. Apparently, 80 percent of day traders lose money over time, so it is not an easy or guaranteed way to earn your fortune.