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Day traders need a profitable strategy and realistic expectations, including enough funds to cover expenses. They must practice and have enough capital to survive for a year without profits. Trading requires continuous practice and study. Success requires a winning strategy, patience, perseverance, and practice.
There are several basic principles that a day trader must keep in mind in order to be successful. A profitable trading strategy is key. The trader must also have realistic expectations, including sufficient funds to pay for day-to-day expenses. Most traders are not successful right away and therefore must be willing to practice.
The main consideration in day trading basics is that the trader must have a day trading strategy that is profitable. If the strategy he is using has a negative mathematical expectation, the trader will lose money. To find the mathematical expectation of a strategy, the probability of winning multiplied by the average amount of winning must be greater than one minus the probability of winning multiplied by the average amount of loss.
Second on the list of day trading basics is to have realistic expectations. A prospective day trader should consider learning day trading like learning to play tennis or chess. Not many people become hugely successful overnight, and most fail to earn enough to support themselves for several months or more.
The day trader must have enough capital to pay the bills of day to day life during the time it takes to make the day trading business profitable and have a sufficient amount of trading capital. A reasonable viewpoint is that the trader must be able to survive for a year without trading profits. The minimum amount of trading capital needed is 15 times the trader’s monthly living expenses. To get by with such a small amount, the trader must make at least 8.5% profit per month, limit his losses to a maximum of 2% of his trading capital, and never have more than three consecutive losses.
Like soccer, tennis or chess, it takes continuous practice to understand the basics of day trading. Experts suggest trading the card in a simulated environment for at least a month. Many brokers offer day trading opportunities with conditions as close to real as possible. For a day trader, study table time is needed to review the day’s charts and time on the weekends spent correcting mistakes and adding to the trader’s knowledge base.
Day trading is an effort of skill. No football team succeeds without training, nor does any tennis player or chess master win. The basics of day trading are to employ a winning trading strategy, have a realistic approach to the trading business, always have enough patience, perseverance and practice in trading.
Smart Asset.
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