- Practice Makes Perfect
The one with patience finds this rule the easiest and the one without patience find it hardest. Before jumping into day trading, you need to understand it better, so practice as much as possible and gather information as much as you can. First of all, you need to open a trade account. Through this account, you trade virtual money in the market as well as you can practice different strategies without putting your real money at risk. Through paper trade accounts, you can also try various instruments and learn the rules in Forex trading, and options trading rules.
2. No trade-in first half-hour
If you are a beginner, then do not trade in the first 30-35 minutes of market opening. The market is a bit confusing during its first half-hour as it is setting up. There is so much fluctuation; it is hard to follow the charts or understand what is about to happen.
Even full experienced traders avoid the initial 30-35 minutes.
3. Avoid Trading on a Margin Account
A margin account is a loan given by your brokerage and secured by the funds of your account. These funds can be used as leverage to buy a high-value stock than you can buy with your existing cash. This leverage represents both your losses and your gains are amplified. So, if you are winning it’s great but it’s awful of you are not.
Advice for the beginners – avoids Trading on a margin account.
Few day trading rules for cash accounts that can come up, even if you are not trading on margin:
All of your bonds and stocks should be settled within three days. That means you must pay for your bought supplies within three days. The brokerage has three days to transfer the money to your account after you sell a stock, and vice versa.
- The Free-Riding Rule
When you buy a stock using unsettled funds is called a free-riding rule.
Issues of the free-riding rule can be avoided by trading through a margin account, but it’s essential for beginners to remain stick to Trading with their cash until they get experienced and confident in their trades. There is a feature to prevent violation of the free-riding rule even before they come up, provided by many online brokerages.
4. Know Your Legal Limits
Knowing your legal limits is essential in everything but most of all in stocks. So many rules are there. In Trading of stock and you need to familiarize yourself with all.
But most important for the beginners is 25k limit rule. If you are willing to trade through a margin account, you must keep your account balance over $25,000 to continue day trade on margin. Keep in mind that day trade is a trade in which stocks are bought and sold on the same day only.
If someone keeps continuing to break 25k rule, he/she will be termed as a pattern day trader, and traders account will be frozen for the next 90 days.
Those who are not trading on margin are subject to different trade rules.
5. Avoid Taking Tips from Unverified Sources
If someone gains money, someone else loses it; this is the thumb rule of the stock market.
Other than insider trading, which is also a severe problem in the stock market, taking tips from unverified sources can end up your money in a total loss.
There are of number “sources” on the internet which will try to make you do a trade or another by having insider information but shouldn’t rely on them. You should ask yourself what their gain in it is.
They may be pumping up a stock’s value so that they can sell it before you, at the perfect time, and take the profit. Or probably they may be running other scams or engaging in insider trading.
So, to be successful in the stock market, you must put your focus first, or you can hire an advisor if you want.
6. Keep Track of Your Trades
Keeping your trades record is very important for every trader, even for an experienced one. It helps in making better decisions and not making the same mistakes again.
When an expert shares a trading rule with you, you must note it down, Through keeping tracks of your past trades and creating a plan and work on them accordingly.
7. Thumb rule
The thumb rule decides the winner and the loser of a day market who gained most is the winner and who lost most is the loser.
Your mistake and experience are the best teacher ever. Only your mistakes can tell you possible reactions to your action. These mistakes can be beneficial for you if you take them seriously. But if you repeat them over and over, you will lose hard and will make someone else rich.
8. Stick to the plan
To survive in fluctuations of day trading, you need to have a plan and stick to it. When you have goals, you make a plan and strategies too. If you ever found yourself focusing out of your plan, then remind yourself and stick to it as only that can save you from impulsive decisions, which can put you in the loss.
9. Know Your Sectors
You can’t be an expert in every sector, so choose yours and stick to them. You need to know your strengths and use them in making a profit.
If you put your money in an unfamiliar sector, you don’t know what circumstances can put you in the loss. But if you want to dive into other sectors, then you must process yourself as you did when you started. You need to know your sector, consume all the trading information about the industry to become an expert. Then only it will work out well.
10. Master Other Trading Instruments
Day trading is not just about stocks, but there are so many different trading instruments too such as bonds, currencies, commodities, derivatives etc.
There are different rules for different day trading options, so familiarize yourself first with them all before jumping in. To familiarize yourself, you can use paper trading platforms.
Some traders dip their toe in one option only, but some try to dip in multiple. Trying and experiencing different trading instruments means more potential.
If you think you are ready to survive this all- focusing on your plans, follow the rules, keeping tracks, learning from mistakes then yes, I think you should try day trading.