To start day trading, an individual must first identify a market of choice, such as stocks, currencies, or commodities. Success in day trading comes from learning day trading strategies, studying the markets, and practicing placing trades through the use of a demo or practice account. Experienced traders often offer training sessions for new traders. Trading successfully typically involves studying closely with an experienced mentor and adhering closely to a well-tested trading methodology when placing trades.
Once an individual decides to start day trading, he must identify a specific market on which to focus his attention. This decision may be based on the amount of capital available, a general interest in a specific market, and/or a personal assessment of his risk tolerance. A day trader who is first starting out might avoid trading large sums in the currency market because it is typically known as a faster moving market and is more volatile than the stock market.
After a specific market has been identified, to start day trading the individual must first learn or develop a trading strategy. This can be gained by studying books written by expert traders or by attending training seminars. Many day traders are trained in formal settings by financial institutions or brokerage houses. Other day traders are self-taught, and they observe market movements, read about the fundamentals of individual companies, and monitor news events that move prices. Many day traders are strictly technical traders who use chart patterns and indicators to determine when to enter and exit trades.
Those who start day trading with little experience typically utilize demo or practice accounts. These accounts allow the day trader to place trades in simulated market environments without risking actual money. Through these types of accounts, new day traders often develop their own trading strategies. They are able to test their trade entries and exits and back test systems to gauge the effectiveness of their strategies without actually entering the live market.
When it is time to start day trading in the live market, most expert traders recommend that new day traders start out with small sums of capital. Trading in a live market environment is far more challenging than placing trades in a demo account. Day traders must become accustomed to adhering to trading plans and trading with discipline. Trading with smaller sums of money in the beginning allows the day trader to make inevitable mistakes without experiencing significant loss. Financial loss is a part of trading, and gradual investments of capital help the new day trader to adjust to the psychological pressures that often accompany the fast pace of day trading.