I'm a moderator on several Reddit financial communities and wrote some wikis there and I'm posting here a few that I wrote entirely for more exposure since they're geared at helping people with trading & investing and some advanced topics. Hopefully it helps someone make the right decisions.
I'll also be tweaking them with the assumption that members of the STEEM community will be reading them especially since crypto and trading have a direct link with each other.
Day trading is buying or selling a security on the same day to achieve a financial gain, usually on an exchange. It can be done within a few seconds or over hours.
Types of securities can be shares of stock, futures contracts, option contracts, foreign currency, or crypto currencies; this isn't a complete list, however they're what most day traders focus on.
Day trading is not like other self employed or side job activities: As you lose at day trading, you lose money, and eventually you can't day trade any longer.
Paper trading aka simulated trading (even staring at charts) won't make you better either because it doesn't take into account your emotions which most likely are the problem and you won't ever solve it with fake money.
Paper trade only to get used to the software and executing order types like market orders, limit orders etc.
Again staring at charts doesn't make you better. Either trade in short sessions, typically right after high volume events, see a forex or economic calendar to know when those are. You could also just trade for 30 to 60 minutes before work, during lunch, or after work.
Just keep in mind that if you're losing money that trying to make back your loses doesn't work at all, no mater how much more time you stare at a screen because at this point you're desperate & angry (even more emotional).
You just need to practice with real money in small amounts, best way to do this is by trading forex or crypto which typically have no account minimums and let you do penny trades or sub penny trades respectively.
If you plan on quitting your job, then your bank roll & savings should be huge: Savings should cover 2 years or more of monthly expenses, and your bank roll should be even bigger.
However if your expenses are paid for because you're a dependent, such as living with your parents or you plan keeping your job & trading part time (morning, lunch, after work), then that's even better since your bank roll can be the minimum:
There are psychologists specifically for dealing with day trader emotions. We can't make recommendations here, but you shouldn't pay more than what a regular psychologist charges, and you should stay away from courses, programs, and retreats offered online.
If you plan on getting a couch for your emotions, don't, seek out a licensed psychologist or a licensed social worker. Think of these people as a doctor for your emotions, so don't seek out a cheap solution or someone who isn't licensed to do this type of work.
Paper trading, like we said earlier, this isn't going to get you good at trading, don't waste too much time on this.
Paper trade to get good with the software you're going to use before using real money so you know what each order type, button, etc does.
Forex is highly recommended to every day trader starting out because leverage is high and most forex brokers require no minimums and let you make penny trades. See Reddit's r/forex's wiki.
You can also use crypto except leverage isn't very high and is different for different crypto coins, however that's not the case with crypto futures like at BitMEX.
In a nut shell, you break up your account in slices and each slice is 1 trade. For example, trading with $100 in a forex account, you would split it by 20, so each trade is $5; while that seems low, you have to consider leverage, forex can have around 50x and some futures products such as treasuries can have over 100x leverage.
But the point to all this is to reduce risk. Think to your self, 1 bad trade = 0 money, so if you want to stay in the game you need more money, so just split your account up. Splitting it in 20 slices means you can make 20 trades. Some traders say only use 1% to 2% of your account, that would mean 100 to 50 trades respectively, but it's more since you're using a percentage, so using 1% of your account for trades.. after 50 trades.. you're left with 61% of your account intact.
See below to continue reading about money & risk management more in depth.
List of brokers for day trading:
Note that PDT aka Pattern Day Trading rules apply to US stock traders who are trading on margin. See below for more info.
Best for beginners since most forex brokers require no capital, you can make penny trades, and leverage is high. Also there are no pattern day trading (PDT) rules to stop you from day trading.
This can be a more interesting market than forex and stocks since you still have high leverage and no PDT rules, but you need more money, around 5k to 10k cash
Again, low capital required and high leverage, however the knowledge required is extremely high so it will take longer to get started on this. Skip it entirely if you're new and stay away from buying just calls and puts.
You need over $25k cash to trade this or you get hit with PDT restrictions, unless you use a non margin account (cash account) but that comes with it's own restrictions however you can day trade longer, see PDT terms below.
No PDT rules, leverage can be super low unless you trade crypto futures, volume can be low depending on which exchange you use; you still have to pay taxes.
To quote Reddit's r/forex wiki:
Money management is a form of risk management and is arguably the most important aspect of your trading when it comes to long term survival. You should always enter trades with a stop loss - the distance of the stop allows you to calculate how large of a percent of your account balance will be lost if your trade stops out. You can run a monte carlo simulation to figure out the risk of having a number of trades go against you in a row to drain your account. The general rule is that you should only risk losing 1-4% of your account per trade entered
And links they shared:
But yes it's highly recommend to split your trades, use leverage, and a stop loss + profit taking limit order. You can do this easily with forex since most forex brokers will let you do penny trades.
Some more links:
After you've traded for some time, you should be able to calculate how much money your trading strategy brings, this is called expectancy and your strategy should have a positive expectancy. Even if you have more bad trades than good, the good trades should provide enough profit to overcome the losses.
Come back to this in the future.
Lots of debates on what type of chart you should use, but candle charts show a good amount of info such as the opening price, the closing price, if price went up or down and how far it went (the high & low) for the candle size.
A lot of day traders use naked charts (no indicators) however most still look at indicators to see how other traders or algos will react. You should be looking at multiple charts of the same security and leave 1 of those charts naked or with very little indicators.
The most useful:
Not necessary, but if you don't like your broker's platform you can use the following and connect them to your broker to make trades.
Typically your broker provides a news feed with some requiring you to pay for faster/better news data.
If you trade futures or forex, the calendars above are essential to knowing when a high volume move is coming.
I can't list every single high volume event for every security, so in addition to an economic calendar, you can find out on your own:
Look at a chart for the security you're going to trade and take note of the volume spikes.
First format that chart so you're looking at days aka daily timeframe. Look at a weeks or two worth of days and try to find the high volume spike. Then zoom into the 4 hour timeframe and then again with 1 hour and 15 minutes take note of the time and date.
Ask yourself why did that happen, it could be as simple as the US exchange nearing the closing time or when Japan wakes up to trade a specific coin.
Don't take a bet before the event! You want to analyze the results immediately after the event and trade accordingly. Perhaps the event was bad and the security is going to go down from there, maybe it's an over reaction and it'll reverse, take 5 to 15 minutes to see what where the security will go, best to have a separate chart that's broken down by 5 minute candles.
First off, keep in mind that algo traders write scripts/bots to deal with these situations and to take the other side of the bet, you'll see lots of whipsaw and generally the opposite effect, however there are big traders waiting for these moments as well, there's also a tug of war occurring and no one can say a strategy will always work 100% of the time:
This doesn't have to be "yesterday" but the last trading session by a specific country like when Chinese traders trade or US traders.
Doji breakout - find a high volume doji candle on daily timeframes, you wait for price to breakout of the high or breakdown of the low before entering your trade
The Reddit version of this guide, that I wrote, can be found here..
Let me know what you think of this guide and ask me any questions you may have.