Day Trading Tips for better profits and how to get started

Day trading can be a high-risk activity, but it can also be very rewarding – if you approach it in a structured way with strong discipline and the necessary knowledge and skills. Here’s a guide to help you get started and increase your chances of making consistent profits from trading.

Getting started with day trading

Day trading involves buying and selling financial instruments (like stocks, forex, commodities or crypto) within the same trading day with the aim of profiting from short-term price movements.

As with any type of trading, you need to understand how to place trades using a structured and robust trade plan, although day trading also requires certain extra considerations.

Picking the right broker

When setting up a trading account, particularly for day trading, you need to choose a reliable broker with low fees (i.e. tight bid-ask spreads), efficient execution, and good trading tools. To ensure reliability, it’s best to choose a broker that’s been in business for several years (I prefer at least ten years) and is regulated in UK, US or Australia. Most retail brokers offer a good range of trading tools, but broker spreads can vary significantly, so make sure to pick a broker with tight spreads to minimise your trading costs (since day trading involves making several trades per day).

Next, make sure your chosen broker offers a demo account so you can practice your trading strategies before risking real money. The trading platform itself is also important. Some brokers offer their own bespoke platforms (with charts and trading functionality), but many brokers also offer the option to use professional trading platforms (like TradingView) which provide excellent functionality.

Understand the news

When trading intra-day, macroeconomic news events can have a huge short-term impact on profitability, so you need to know exactly what macro news is being announced and when. Examples of macro news include interest rates, inflation, GDP and other data indicating the performance of a country’s economy. Macro calendars are widely available for free, but the news in these free calendars is delayed by a minute or so, meaning you can’t trade off them. Real-time calendars are available for around $50-150 per month, and you’ll need this if you want to trade directly off macro news events.

Once you’ve got your demo trading platform set up, the next (big) step is to formulate a trading strategy or trade plan. For most retail traders, this involves learning to read charts and interpret technical indicators. A structured trade plan minimises emotional decision-making and enables you to back-test your strategy and accurately review past trades.

Popular day trading strategies include:

1. Scalping: Aiming to make lots of small profits from very short-term trading (sometimes just a few seconds in the market).
2. Momentum Trading: Riding stocks or other assets that are trending strongly during the day.
3. Reversal Trading: Trying to pick when a price has moved too far too fast in one direction and is looking exhausted ahead of a potential short-term trend reversal.
4. Breakout Trading: Entering trades when the price breaks out from a key support or resistance level in the expectation that the breakout move will keep going in that direction

Learning and refining a trade plan takes time and effort, so make your trading rules as precise as possible and then practice your trading on a demo account before committing real money to the markets. There are hundreds of trading videos online (some good, but some less good!), but if you want to learn properly, it’s best to enrol with a formal trading academy where you can get immediate support and one-on-one mentorship while you’re learning. Trying to save money by self-learning can often prove to be a false economy since trading losses can quickly mount up if you’re not 100% sure what you’re doing.

How to develop a trade plan

One good thing about trading is that there are no fixed rules telling you how to trade so you can make your own decisions as to why and when you trade. The vast majority of individual retail traders use charts and technical analysis to generate trade ideas, while others prefer to react to macro news events to trigger their trades.

Step one is to learn what you’re doing. Before you can build a trade plan, you need to understand the tools and indicators available and how to interpret them. There are dozens of technical indicators you can use, but you cannot use all of them at the same time, since this often leads to “analysis paralysis” as you wait for all indicators to point in the same direction (which they never do).

Other things to consider

Once you have your trade plan in place, you still have other things to consider.

1. Risk Management
• Always set stop losses on your trades to limit your risk (usually around 1-2% of your trading capital).
• Use Risk-to-Reward Ratios (RRR): Always aim to make more profit you’re your risk. Depending on your strategy you can aim for, say, 2-to-1 or 3-to-1 RRR. (i.e. risk $1 to make $2 or $3).
2. Maintain your discipline and emotional control
• Stick to your strategy, particularly during emotional highs and lows.
• Avoid overtrading or revenge trading after losses.
• Trade with a clear mind and avoid impulsive decisions based off fear, greed, hope or other distracting emotions.
3. Keep an eye on the news
• Monitor key macroeconomic data (e.g., interest rates, GDP, earnings, etc.).
• Know the exact market opening and closing times for the assets you trade.
4. Maintain a trading journal
• Keep accurate records of all your trades, including entry/exit levels, stops and targets, profits and losses, etc.
• Review your journal regularly to identify what is working and what is not – and adjust your plan accordingly.

Common mistakes to avoid

Don’t forget… trading isn’t easy and achieving consistent success requires dedication and hard work. That said, there are a few obvious mistakes that can be easily avoided.

1. Trading without a plan
   Entering trades without a defined strategy leads to impulsive and emotional decisions, inevitably leading to losses.
2. Overleveraging
   You need to understand how leverage works. Using too much margin or leverage can increase your risk to uncomfortable levels. Start small and build up as you gain more experience and confidence.
3. Ignoring risk management
   ALWAYS use stop losses to limit your risk on every trade. If you don’t control your risk, one trade can potentially wipe out your entire account.
4. Following tips blindly
   Avoid simply following other traders or trading off social media posts or rumours. Make sure to do your own research and justify each trading decision.
5. Chasing Losses
   Revenge trading - trying to recover losses quickly - often leads to more bigger losses. Don’t do it!

Conclusion

Successful trading is not easy – and you shouldn’t believe anyone who tells you it is, but it IS possible to learn how to trade successfully. It requires hard work, dedication and discipline to achieve consistent success, and you should aim to continue learning all the time. Markets evolve over time, and your trading experiences will help guide you to refine your trading style and technique.

Finally, stay updated on the latest news and macro data, and focus on quality, not quantity. It’s better to execute a few well-thought-out trades based off a structured trade plan than many impulsive trades based off the seat of your pants!

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