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How to learn day trading online

Day trading is a unique form of stock trading, and remains one of the most popular trading styles in the UK.

However, it can be daunting and risky for the inexperienced. It can also take significant time to master with amateur and budding traders needing to get to grips with their own mindset. You need to cultivate an analytical yet rational perspective – and bank significant hours of study before even making your first trade.

Here are just some of the things that you need to learn when it comes to day trading online.

What is day trading?

The first thing you need to understand is what day trading involves and how it differs from investment trading.

Day trading involves the buying and selling of multiple financial assets within a strict timeframe, known as the ‘trading day’. A day trader has to be focussed enough to see where there is scope to take advantage of a marginal movement within the market to make a profit. This type of trading is unique because traders will start a new trade in the morning and close the same day. 

Investment trading, on the other hand, looks far beyond a 24-hour window. Investment strategies involve investing in a stock or asset for a long period of time, for example, a week, month or year. The method here is to establish a profit based on price movements which occur over a longer time frame.

What is involved in the day trading market?

There is a wide variety of options when it comes to day trading. But typically, day trading markets include:

  • Shares – where a close is made at the end of the day and where an outside influence (such as the news) cannot realistically impact a price dramatically
  • Indices – similar to shares but there is more speculating. Traders will typically be juggling a group of shares instead of just the one and will deal with a wider proportion of the stock market.
  • Forex – where a trader buys and sells currency pairs in the same day.

How to learn day trade

Due to the complex nature of day trading, it is essential that you embark on a learning journey and commit to studying the practice before you begin trading with real shares (and real money).

The first step to leaning how to day trade is by undertaking a financial trading course. Courses can start at a Level 1 (RQF) all the way up to a Level 5 Diploma in financial trading. You will learn all you need to know about the stock market, different ways to trade and, ultimately, how you can day trade successfully. 

Alongside your studies, you should use a practice account. It’s important that you refrain from using real money in the stock market in the beginning steps as you need to master the art and protect yourself from financial losses. 

However, beyond a course and practice account, you can take matters into your own hands by reading books, conducting online research and immersing yourself in financial news and stock market fluctuations every day. 

There are plenty of resources online to assist you throughout your learning journey, and if you want to expand your understanding even further, search for a reputable mentor who can take you under their wing and show you the ropes.

Do I need qualification to become a day trader?

Although a degree is preferred, it is not essential when it comes to day trading. 

However, you still need to learn specific strategies, like trend trading, swing trading, scalping, mean reversion, money flows and more trading methods and tactics until you find your preferred approach. An online course and diploma in financial trading is often enough to teach you all of these tricks of the trade.

To summarise:

  1. Trend trading – is where traders seek to make money based on predictions of asset prices (and sell or buy in accordance to the emerging ‘trend’).
  2. Swing trading – is where traders utilise short-term price patterns based on the premise that such patterns are rarely linear, thus making money from the ‘swing’ movements in the market. It is important to note that this approach takes significant time and experience to master. Traders must be able to see a price movement ahead of time in order to act accordingly and make money from the swing.
  3. Scalping – is where traders make frequent yet small profits. This is a favourable approach by many traders as it typically has a high win rate. However, traders must also be mindful that they need to adhere to a very strict exit strategy as losses can soon overshadow profits.
  4. Mean reversion – is where traders adhere to a trading theory that prices always revert to its historical mean. Again, traders need a high degree of technical analysis and numeracy skills to be able to make such predictions and note where a financial instrument differs from its historical average in order to make a profit.
  5. Money flows – is where traders compare the number of trades made in the previous day to the next in order to identify if the money flow was positive or negative – I.e., if a financial instrument or asset was oversold or overbought. If the signs point to the asset being overbought, the trader might be compelled to sell whereas if a lower reading indicates an asset was oversold, the trader might buy.

As you can see, these theories and methods are complex and, sometimes, contradictory. You need to learn each method in order to establish which is the right course of action for you and what kind of day trader you plan on becoming.

What else should I know about day trading online?

It is vital that you understand all the factors that are at play that impact day trading. You must also choose your strategy wisely as this will outline what kind of day trader you will become.

After the completion of a financial trading course, you should be ready to begin trading with a live account. After all, the best way to learn is to actually learn on the job. Just make sure that you have thoroughly researched and have a concrete trading plan in place – and that you take it slow with your first position.

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