Be able to make consistent profits on the trading day

What is and how does day trading work?

The name already shows what day trading is all about. This refers to short-term trading that takes less than a day to make profits on the financial markets with price fluctuations. The procedure for day trading is very different. On the one hand, there are day traders who make a profit by doing many trades in one day. Other day traders, on the other hand, try to be successful with one or a maximum of two trades a day. As a rule, stocks, futures and, above all, foreign exchange are traded. As a day trader, you can work full-time as well as part-time. First of all, day trading can be very lucrative, but long-term success is only achieved with a few day traders.

Today we can see a real hype around the topic of day trading. There are websites that say that day trading is an easy way to get rich quick. Other authors on the net strongly advise against it, as there is no way to get rich with it. As is so often the case, the truth lies in the middle. Because yes, it is possible to get rich day trading and yes, most day traders are unsuccessful in the long run. As is so often the case: preparation and information are the most important things. So that you are a little better prepared, we give you a few tips on day trading below.

How exactly does day trading work?

First, let's take a quick look at the theory and shed light on exactly how day trading works. For example, day traders use leverage in day-to-day business to maximize profits, so that the trader borrows money from his broker at short notice. If you win, the advantage is obvious. For example, if a security rises by 2 percent and the trader uses a leverage of 1:10, this is a whopping 20 percent profit. But be careful: If the price drops by two percent, the loss with this leverage is also a whopping 20 percent.

Most day traders can be found in forex trading, followed by derivatives such as futures or options, as well as in stocks. One of the main advantages of derivatives is that they are ideally suited for leveraged trading. However, the currency pairs offer even more advantages, so that day traders find themselves mainly in this area. Because here you can not only trade around the clock 24/7, but there is also a high volume available.

What you have to pay attention to when day trading

When we talk about successful day trading, as noted, this is not about the quick career that brings wealth, nor is it something that takes years to gain consistency. Typically, it should take you between six and 12 months to acquire the knowledge, knowledge, and strategy to survive day trading.

But first, there is one fact you need to be sure of: there is a critical difficulty. The point is that a trading strategy can work perfectly for one month, while it is anything but good for the next month. Since there are no two completely the same days in the trading market, you and your strategy have to constantly adapt.

For example, there are the difficulties that when you start out with a demo account you don't practice a certain strategy for several months before you start using real money. So you have no experience of how this particular strategy works and how you have to adapt it to possibly changed market conditions. Therefore, at the beginning of your day trading career, you should practice and "train" a certain method of day trading every day for at least six months to a year. Even in the practice phase with a demo account, day trading requires a daily expenditure of time. Because every day you acquire the habits and knowledge that you need for day trading with real money.

It is also important to learn on several fronts at the same time. Because already in this training phase you will notice that you achieve better results at certain times of the day than at other times. You should then concentrate on these times - both during “demo time” and later in real money trading. You should also be aware that for the first year you will spend several hours a day day trading. Experienced day traders, on the other hand, often only trade for one to three hours a day after some experience.

95 percent of day traders fail - impatience is the wrong companion

Another fact should always be in your mind: Only 5 percent of day traders are successful in the long term. That means that the majority of day traders fail. But the reason for this is also quite simple. Most of these traders just don't practice enough. Because most of these 95 percent did not initially take sufficient training time of 6 to 12 months. But if you want to be one of the successful day traders, you should spend enough time in the demo account.

What strategies is day trading about?

The question here is of course which strategies are the focus of day traders. The advantage here is that you can benefit from both rising and falling prices. Because in day trading you can go “long” and benefit from the rising price, or “short” to take advantage of the falling price.

Event trading is therefore one of the most popular strategies. This means that you react as soon as news appears that could affect price changes in certain markets. In the US, for example, some day traders rush to trade as soon as the job market data is released.

So while some day traders jump into event trading, on the other hand there are day traders who observe the details very closely and are already active in the event of small price movements in large position sizes. It is not uncommon for these traders to complete several dozen trades a day. Other traders, on the other hand, only bet on a few trades a day and focus on the larger price movements.

How much capital do I need for day trading?

An important question that many newbies ask themselves concerns the necessary capital requirements. Of course, no general statement can be made here. Because different markets also require different capital requirements for day trading. For example, while stocks are popular, they are also where they need the most capital. A start for less than 10,000 euros does not usually make sense here. That is why leverage products such as Forex trading or CFDs are much more popular in day trading, especially with beginners.

Because in forex trading and CFD trading, starting with 500 euros already makes sense, it is sometimes even possible with lower amounts. For derivatives like futures, you should calculate roughly twice as much. The levers ensure that you can enter the day trading business here so cheaply. For example, with a leverage of 10: 1, you can invest ten times your capital outlay. It is important, however, that you never spend more than 1 percent of the total starting capital on a single trade. You should definitely pay attention to this.

The possible monthly returns in day trading

Another point is of course very important for day traders: How much can I actually win day trading? Unsurprisingly, of course, we cannot make any specific statements here. Because the spectrum of day trading is so extensive that the profits can be correspondingly extensive. As already mentioned, 95 percent of day traders make losses. On the other hand, there are the successful day traders who earn several hundred thousand euros a year. You can already see your potential profit with your demo account. That's why it's so important to start with a demo account. It is just as important to create the demo account with the exact amount you want to start with with real money. This is the best way to see for yourself what is possible in terms of profits.

As already mentioned, you should only spend 1 percent of the starting capital on a single trade. Likewise, you should only risk 1 percent of the capital per trading day. As a rule, you can expect a maximum increase of between 10 and 30 percent per month. This is the goal you should at least work towards. These numbers, however, are numbers from smaller accounts, which new traders start with. If a trader has more capital, his percentage return will be lower. You can achieve the high returns more easily with lower capital.

The technical requirements

A day trader can start quite easily these days. First of all, a laptop or a desktop computer is sufficient - but it works well. But there are also dealers who use at least two monitors together with a desktop computer. Of course, you also need a fast internet connection. You should also have stable internet reception. You should also be equipped with fast and stable internet reception on your smartphone just in case. Then an alternative internet connection is available to you should your main connection fail.

In addition, you should always have a phone available just in case - landline or cell phone. Because if the internet should fail completely for whatever reason, you can call or chat with your broker in an emergency.

In addition, of course, you need a trading platform that allows you to place both demo trades and live trades. As a rule, you receive the software of these brokers from the brokers as day traders. In addition, there is also third-party software. Most of the time, the trading software also includes charts. If not, you will need third-party charting software to be successful in day trading.

Difficulties and Risks in Day Trading

Of course, you also have to overcome a number of hurdles and risks in day trading. The greatest difficulty: every trading day is different! As a trader, you therefore need a strategy with which you can be successful under practically all market conditions. However, this does not mean that you win every day. On the contrary, even if you have a very good strategy, there will still be several lossy days in the month. It is not important for you to win every trade every day. What ultimately counts: The bottom line for a month's total profits.

Therefore, you need to develop a method that can adapt to the prevailing conditions of the market. This means that you need to avoid systems that are too complex. In addition, you should not underestimate the psychological hurdles. If you decide to become a full-time day trader, you will not receive a regular salary. Especially when trading is not going so well and you have to pay bills, this can be an enormous psychological challenge. This often leads to mistakes in action that you should absolutely avoid.

In addition, other risks await. Day traders, for example, face strong opponents: the banks. As a rule, these have employed several successful traders who have been active for years and thus help the bank to gain an information advantage. The banks also have automated trading systems that also give financial institutions a head start. Last but not least, you should also be aware of the potential addiction that day trading can bring.

Invest in Yourself!

Last but not least, we would like to add an important tip at this point: Invest in yourself! Avoid investing too much or too much in gimmicks. There are a number of software products that promise you overnight fortune with day trading. However, these usually only have a very short shelf life. You may be able to do it well for a while, but in the long run it usually becomes a disappointment.

Better to invest this money in your own education. Read many books and articles on trading and day trading in particular. Also consider whether you might be looking for a mentor. In principle, it is always better to invest in your own training and knowledge!