Trading Strategies for Beginners

Trading is the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game—if it is played correctly. But it can be a dangerous game for newbies or anyone who doesn't adhere to a well-thought-out strategy.

Below, we'll take a look at some general day trading principles and then move on to deciding when to buy and sell, common day trading strategies, basic charts and patterns, and how to limit losses.

KEY TAKEAWAYS
● Trading is only profitable in the long run when traders take it seriously and do their research.
● Trading is a job, not a hobby; treat it as such—be diligent, focused, objective, and keep emotions out of it.

● Here we provide some basic tips and know-how to become a successful trader.

1. Knowledge Is Power
In addition to knowledge of basic trading procedures, traders need to keep up on the latest market news and events that affect trades.
So do your homework. Make a wish list of assets you'd like to trade and keep yourself informed about the selected companies and general markets. Scan business news and visit reliable financial websites.

2. Set Aside Funds

Assess how much capital you're willing to risk on each trade. Many successful day traders risk less than 1% to 2% of their accounts per trade. 
Set aside a surplus amount of funds you can trade with and are prepared to lose. Remember, it may or may not happen.

3. Set Aside Time, Too
Trading requires your time. You'll need to give up most of your day, in fact. Don’t consider it if you have limited time to spare.
The process requires a trader to track the markets and spot opportunities, which can arise at any time during trading hours. Moving quickly is key.

4. Start Small
As a beginner, focus on a maximum of one to two trade during a session. Tracking and finding opportunities is easier with just a few stocks. Recently, it has become increasingly common to be able to trade fractional shares, so you can specify specific, smaller amounts you wish to invest.

5. Time Those Trades
Many orders placed by investors and traders begin to execute as soon as the markets open in the morning, which contributes to price volatility. A seasoned player may be able to recognize patterns and pick appropriately to make profits. But for newbies, it may be better just to read the market without making any moves for the first 15 to 20 minutes.
The middle hours are usually less volatile, and then movement begins to pick up again toward the closing bell. Though the rush hours offer opportunities, it’s safer for beginners to avoid them at first.

6. Cut Losses With Limit Orders
Decide what type of orders you'll use to enter and exit trades. Will you use market orders or limit orders? When you place a market order, it's executed at the best price available at the time—thus, no price guarantee. A limit order, meanwhile, guarantees the price but not the execution. Limit orders help you trade with more precision, wherein you set your price (not unrealistic but executable) for buying as well as selling. More sophisticated and experienced day traders may employ the use of options strategies to hedge their positions as well.

7. Be Realistic About Profits
A strategy doesn't need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. However, they make more on their winners than they lose on their losers. Make sure the risk on each trade is limited to a specific percentage of the account and that entry and exit methods are clearly defined and written down.

8. Stay Cool
There are times when the markets test your nerves. As a trader, you need to learn to keep greed, hope, and fear at bay. Decisions should be governed by logic and not emotion.

9. Stick to the Plan
Successful traders have to move fast, but they don't have to think fast. Why? Because they've developed a trading strategy in advance, along with the discipline to stick to that strategy. It is important to follow your formula closely rather than try to chase profits. Don't let your emotions get the best of you and make you abandon your strategy. There's a mantra among traders: "Plan your trade and trade your plan."