Individual stocks continue to be volatile as the interest for trading services has been on the rise in 2020. Day trading stocks is thus a very popular activity, especially among retail individuals, but not all of them are managing to grasp this activity properly. There is nothing hidden or occult when it comes to day trading successfully, which is why we’ll discuss four key aspects here that every retail trader should follow, to make informed trading decisions.
# Use trading apps
The usage of trading apps is no longer difficult considering most people have a smartphone and brokerage houses have support for both iOS and Android devices. With a trading app, a trader can stay updated with the latest developments of stocks and constantly adjust his strategy based on its trading system.
# Be updated with the latest financial news and data
Stocks are extremely sensitive to major market news and it is important to stay updated with all the latest data. A few days ago, stocks had jumped impulsively on news related to the Pfizer vaccine development for Covid-19, and trading activity around the world amounted to $2 trillion. This all means that in the short-term, stock-specific news is extremely decisive in influencing the market participants’ decision-making process.
At the same time, news and financial data can influence long-term developments, considering the performance of the underlying companies will play a significant role in determining how investors or traders are due to treat any given stock.
# Learn how to read the price action
Technical analysis is one of the main approaches used for day trading stocks, simply because understanding the price action context can provide valuable information about how the majority of market participants are treating a security.
Stock prices react to past significant highs or lows, support/resistance levels, Fibonacci levels, and using Oscillators can help traders notice when overbought or oversold conditions are reached. Sometimes the news is misleading and makes traders behave irrationally. Reading the price action can enable them into thinking objectively, making a decision based on the market, and not on their subjective thinking.
# Develop your rules-based system
The volatility caused by the global pandemic has drawn many new entrants to trading, due to the potential for profits based on large price movements. However, the majority of new traders are still unable to tackle this endeavor successfully, mainly due to the inability to develop a winning rules-based system.
When day trading stocks, traders are bombarded with a ton of information, and deciding which is the right one to focus on is a critical task. As a result, it is important to have a rules-based system, not rely on anybody’s ideas, and trade the market according to the trading signals that arise.
Traders are afraid of being wrong and this fear leads them to over-optimizing their market approach. Losses are part of the game, and risk management will be the factor helping them to get past difficult periods.
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