Rowan Relton | Day Trading Strategies for Beginners

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Rowan Relton | Day Trading Strategies for Beginners

According to commodity trader - Rowan Relton, day trading is the act of buying and selling a financial instrument within the same day or even multiple times.

According to commodity trader - Rowan Relton, day trading is the act of buying and selling a financial instrument within the same day or even multiple times over the course of a day. Taking advantage of small price moves can be a lucrative game—if it is played correctly. But it can be a dangerous game for newbies or anyone who doesn't adhere to a well-thought-out strategy.

Not all brokers are suited for the high volume of trades made by day traders, however. But some brokers are designed with the day trader in mind. You can check out our list of the best brokers for day trading to see which brokers best accommodate those who would like to day trade.

Take a look at some day trading strategies, recommended by Rowan Relton.

1. Knowledge Is Power

In addition to knowledge of basic trading procedures, day traders need to keep up on the latest stock market news and events that affect stocks—the Fed's interest rate plans, the economic outlook, etc.

So do your homework. Make a wish list of stocks you'd like to trade and keep yourself informed about the selected companies and general markets. Scan business news and visit reliable financial websites, says Rowan Relton.

2. Set Aside Funds

Assess how much capital you're willing to risk on each trade. Many successful day traders risk less than 1% to 2% of their account per trade. If you have a $40,000 trading account and are willing to risk 0.5% of your capital on each trade, your maximum loss per trade is $200 (0.5% * $40,000).

Set aside a surplus amount of funds you can trade with and you're prepared to lose. Remember, it may or may not happen.

3. Set Aside Time, Too

Day trading requires your time. That's why it's called day trading. You'll need to give up most of your day, in fact. Don’t consider it if you have limited time to spare.

The process requires a trader to track the markets and spot opportunities, which can arise at any time during trading hours. Moving quickly is key.

4. Start Small

As a beginner, focus on a maximum of one to two stocks during a session. Tracking and finding opportunities is easier with just a few stocks. Recently, it has become increasingly common to be able to trade fractional shares, so you can specify specific, smaller dollar amounts you wish to invest.

That means if Apple shares are trading at $250 and you only want to buy $50 worth, many brokers will now let you purchase one-fifth of a share.

5. Avoid Penny Stocks

You're probably looking for deals and low prices but stay away from penny stocks. These stocks are often illiquid, and chances of hitting a jackpot are often bleak, says Rowan Relton.

Many stocks trading under $5 a share become de-listed from major stock exchanges and are only tradable over-the-counter (OTC). Unless you see a real opportunity and have done your research, stay clear of these.