Source: Penny Stocks
Like many Americans who are planning their futures, the question always arises, “how can I make more money to retire earlier?” For some, the answer is to pick up a second job or go back to school and acquire more skills to receive higher pay. But for an ever increasing number of people, the stock market offers a unique opportunity to make money day trading from the comfort of, well, anywhere with WiFi!
But – for the untrained and inexperienced – the stock market is a jungle full of tigers waiting to pounce on you the second you set foot in their domain. So how can you make it work? Well, keep reading!
Step 1: Open a Brokerage Account
The first step to starting to trade stocks is to open a brokerage account, otherwise known as a trading platform. Brokerages are the actual company that you will place orders to buy and sell stocks through. Most firms will require a 24-48 hour approval process to open a new account before you can start trading, but in some cases that will happen quicker.
The most important thing to know before opening a brokerage account is the commission fee structure. If you’re just beginning, you want to use brokerage firms that offer zero or very low commission.
You’ve heard all of the big ones – Charles Schwabb, TD Ameritrade, E-Trade, etc. and you’ve likely heard of some of the smaller more beginner friendly ones like Robinhood or WeBull. If you’d like a more in-depth review of some of the platforms I’ve used – click here to hop on over to my review.
Step 2: Learn the Basics of day trading
I can not stress enough how important educating yourself on the ins and outs of the stock market and day trading is to be successful. The temptation to jump in and start buying is high, I understand that, but I can promise you that if you hop in on the next “hot stock” without spending time to understand why that stock is hot or what indicators look like to know when to sell – you will eventually blow your account.
When I first started trading, I spent more time reading articles and watching explainer videos than I did even looking at the stock market.
There are almost unlimited topics that you can learn about pertaining to day trading and the stock market, but if I had to boil it down to five main topics, they would be:
- Learn about Candlestick Patterns
- Understand what types of catalyst drive stock explosions & dives
- Learn about the different kinds of buy and sell orders
- Figure out your trading strategy, test it, re-test it, then implement it
- Learn how to identify your daily watch list
When I first started, I would often times read or watch a video about something new and then spend a few hours watching a couple different stocks to see what I learned in action. Doing so gave me confidence to know that when I see specific patterns or indicators that I should buy or sell.
Step 3: Start day Trading Small
Now that you’ve opened an account and have spent significant time learning the basics (the more time you invest the better) you’re ready to dip your toes in the water. Please DO NOT go all in right away because that is a sure fire way to blow your account.
I would personally recommend starting with no more than $1,000 in your honeypot to learn how to day trade – but – it’s very important that you follow the rule of “never invest in the stock market what you can’t afford to lose”. The stock market is unpredictable and you can very easily lose $1,000 in a matter of minutes if you aren’t careful.
If you can’t afford to use real money, that’s okay too! Many brokerage platforms now offer what is called “Paper Trading” – which is essentially trading with fake money. There is no real risk involved and you get to practice the fundamentals of buying/selling and learning what strategy works for you.
Step 4: Focus on the Percent, Not the Dollar
When you’re just starting out, it is really easy to get discouraged, especially when you’re starting with a smaller account. You will consistently see advertisements online about these guys who try to sell the “get quick rich” scheme and tell you about how they turned a $100 account into millions. While some of those stories might be true, I can promise you that they do not care how successful you are and only want your subscriptions.
So, when I first got started I found it really helpful to focus on the percentage gains I was making and not the dollar amount. I know that sounds weird but stick with me. If you can consistently make 10% gains using a $500 account by learning a strategy that works for you and sticking with it – then that same 10% gain with a $500,000 remains intact.
Very successful traders will consistently average 3-5% gains a day, and those gains add up to millions a year when your account is large enough. Most day traders scoff at a 5% gain because they want the home runs of 30, 40, 50% in a single day.
Those days will happen, but it’s incredibly important to stay consistent, especially if you are hoping for this to be a new career or a large source of income. You may miss out on some potential profit if you sell before the stock hits the high because you followed your plan, but you will lock in that profit and remain profitable.
Step 5: Review Your Trades
At the end of each trading day, you should spend some time doing a little unwind and decompress by reviewing your trades from the day. Much like football, being an armchair quarterback has its advantages in Day Trading. You will be able to slow down the game tape and really look at what you did, analyze if it was a good or bad buy/sell and why so you can either repeat it in the future or learn from your mistakes.
The best advice that you can follow when you’re just starting out is to just take it slow. The stock market will always be there and the next “hot stock” will always come up. FOMO (Fear of Missing Out) is a real emotion and it is one you should work hard to avoid when trading.