Guide to Daytrading

We have written more than 200 articles the past two years about daytrading. As a new daytrader, it might be difficult to know where exactly to start, and this is why we have created this guide for you.

The guide is in three steps. First step is for the completely new daytrader, second step is for the intermediate daytrader and third step is for the experienced daytrader.

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The new Daytrader

Here is the most important articles for the daytrader that is completely new to this game.

Introductuion to Daytrading

If you are completely new to Daytrading, we suggest that you start out by reading this article which briefly describes what daytrading is. After that, you should read this article which goes into the details of what traits the successful daytraders’ possess.

Technical Analysis

Almost all daytrades use some sort of technical analysis in their trading. If you are totally new to reading charts, then we would suggest that you read this article about the candlestick chart and what it is made of, and about the different candlestick patterns. Next thing you need to do is to learn about the classic chart patterns, the different indicators, and other sorts of technical analysis.

What kind of trader are you?

It’s important to know what kind of trader you are. For example, you need to figure out what kind of trading style suits you. Are you more comfortable with going with the trend, or maybe you feel better about Mean Reversion trading?

And more importantly what timeframes are you going to be trading? Are you going to sit in front of the screen for 10 hours a day as a Scalper or a Daytrader? Or do you have a full-time job and can only look at the markets a couple of times a day? Then you might consider going into Swingtrading or even Position Trading.

Strategies

After you have learned the skills of reading charts and the fundamentals of trading, you need to start working on a strategy that you can begin to trade. You can read about different strategies here, and take a look at Hans-Henrik Nielsens popular 5/1 method here.

Demo trading

When you have created a strategy, it’s always a good idea to test it on a demo account before you risk any money on it on a real account. You can create a free demo account on SpreadMarket here.

The intermediate Daytrader

There is a lot of material on the internet which creates false expectations for new daytraders that think it’s easy to make a lot of money quick. This is not true. Daytrading is a very hard game, but it can be done. Successful trading requires discipline, an edge, patience, screen-time and dedication.

Risk management

All the long-term successful traders are almost obsessed with keeping their risk in check. Risk management is one of (if not the most) important aspect of daytrading. If you don’t have a plan for managing risk, you will no doubt see a lot of inconsistency in your results. You can even turn a profitable strategy into a losing one, if you don’t practise sound risk management.

We have written quite a few articles about risk management, and we would suggest that you start out by reading this article about R-multiples, and after that about position sizing.

Psychology

Many aspects in trading goes against our natural instincts. We as humans are not naturally wired to trade with success. There are deeply rooted habits and intuitions which are not in harmony with daytrading. A classic example is that we often tend to grab our profits too quickly (not letting our winning trades run far enough) and let our losers run too far. You should read this article about why psychology is such a big part of daytrading and then read about a few tips to minimize the psychological pressure in daytrading.

Brokers

When you feel ready to go live and risk real money on a real account, you need to find a decent broker to trade with. We have reviewed a lot of brokers which you can read about here. SpreadMarket is the one we recommend as it tops the other brokers on most criterias.

The experienced daytrader

If you have been trading for half a year / a year’s time, but still not have a consistent process and approach to your trading, the first thing you need to do is to get a trading journal if you don’t already have one.

Trading Journal

A trading journal is a vital tool for improving your performance as a trader. You need to record all your trades and review them. If you are an excel wizard you can make your own journal, but we recommend that you give Edgewonk a shot. They are the best retail trading journaling software on the market. You can read more about Edgewonk here.

Routines and improvement

All the successful traders we know have a fixed set of routines. This includes having a daily plan of which markets to trade, including the economic news for the day and so on. And of course, logging all the trades in your trading journal, and reviewing the journal once a week, month, quarter and year.

Questions or comments?

If you have any questions or comments you are welcome to post them in the comments sections below here.

Gustav Mejlvang

Gustav Mejlvang is experienced day trader particular interested in trading algorithms, strategy development and software.

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