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WHY TRADERS NEVER MAKE IT – FOREX-STOCKS-CRYPTOCURRENCY
Let’s first understand the concept of Day trading. A trade is defined as the purchase and sale of a security. Day traders usually buy and sell at the same day. It can occur in any market place, like cryptocurrency or stocks trading. But mostly forex traders are the heaviest day traders. The successful traders are usually extremely educated and have a heavy funded account. The good traders use high amounts of leverage and short term trading strategies to capitalise on the small price movements in highly liquid stocks or currencies.
Day traders use different trading strategies but the most popular ones are Scalping, which is when you make small profits on small price movements throughout the day.
Swing traders who primarily uses major price zones to determine their buy and sell decisions combined with fundamentals.
And high frequency trading, which is now ruling the markets. This is a strategy that use a sophisticated algorithm to exploit small or short term market inefficiencies.
Being a trader is definitely not for everyone and involves significant risks. It requires an in-depth of understanding of how the market works and need to be a forever student. Because a strategy that works for one market or in the moment. Will not work the same in the future. Because the market is always changing. There are many success stories of traders who struck it rich as a day trader, but remember that most do not. Many will barely stay a float. This is because professional traders treat it as a profession, while bad traders believe it is a get rich quick scheme.
To become a professional day trader, you need to well established in the field. You need to develop an in depth knowledge of the marketplace.
If you attempt to day trade without an understanding of the underlying factors that actually move the markets, like fundamentals or proper technical analysis you will find yourself often loosing money. Technical analysis and chart reading is a great skill to posses as a trader, but without an in depth understanding of the market you’re in and the assets that exist in the market, charts can be very deceiving to you. You really need to your proper homework and understand the ins and outs of the instruments you trade.
Individual traders typically day trade using technical analysis and swing trades combined with leverage to generate enough profits on small price movements in highly liquid stocks. But to be truly efficient in day trading stocks you need access to complex financial services and instruments in the market place.
Day trading is a career that requires a lot of time to be mastered, this is not something that you can take lightly and expect to make a career out of it. If you do decide to pursue trading, remember to always start small, focus on a few pairs in forex or a few stocks rather than going into the market head first. Going all in in the beginning will end up with one thing and one thing only and that is huge losses.
No matter how much you research or how well you select your trades, many of the trades you take will end up as losers. It is for this reason that it is highly important to control your risk on every trade. There is no way we can be 100% certain that a trade will automatically become a winner or loser or else we would always avoid losses. A loss can get out of hand if you do not control it and volatile stocks or pairs can erase a significant portion of your trading account within minutes, especially if you use a lot of leverage. To avoid this you need to follow a few steps.
Do not risk more than 1% of your trading account on a trade, meaning do not lose more than 1% of your account on a single trade.
Many beginners believe that risking 1% means they can only use 1% of their account to buy a stock or pair with, which is not true. You can buy a stock for your whole account, just remember to place a stop loss that takes you out immediately if you are at a 1% loss.
Some experienced traders are willing to risk up to 2-5% of their account. This is typical true when they have two accounts, one that is for long term serious trading, and one play account, where you go a little higher risk for higher reward, but usually this account is kept small and something you can afford to loose to play around with. It is more gambling with the mentality of outdoing the probability of winning in the long run.
