Posted by forex at 6:28 AM
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1. Determine how much money you can afford to invest in your online day trading venture. The more money you invest, the more you can diversify your portfolio and the greater advantage you can give yourself when you find an opportunity to profit. It also means more money at risk, so be careful to not invest more money than you can afford to lose.
2. Be prepared to absorb losses. If every trade earned a profit, we would all be billionaires. It is important to realize that taking a loss on some trades is a part of the reality of investing. Try to use proper research to avoid this type of negative trading, but be prepared for it when it happens. Diversify your investments across various stocks to help minimize the effects of a sudden downturn in the market.
3. Develop an exit strategy for your day-trading activities. All successful investments include an exit strategy, and online day trading is no different. Decide what percentage of your trading profits should be reinvested and what percentage should be held out as a replacement for your original investment. The ideal scenario is to have all of your original investment held out at some point so that all of the money you are trading with is from your profits.
4. Assemble a computer system and Internet connection that is designed with speed in mind. Sometimes the value of a stock changes very quickly. If you are buying and selling constantly, then it is important for those trades to be executed as close to instantly as possible. A slow Internet connection could inhibit your trading activity. Buy a computer with a fast processor and plenty of RAM. Avoid using slow dial-up Internet connections, and opt to use high-speed broadband connections instead. Cable and DSL are ideal connections for online day trading.
5. Open an account at a company that allows you to execute your own trades online. Companies to consider include eTrade, Scottrade and TD Ameritrade. Links to each of these can be found in 'Additional Resources,' below. These companies provide you with extensive tools to monitor the activity of your stocks, as well as to forecast trends based on historical data. Most importantly, they allow you to buy and sell shares of stock in real time, which is the most important element for any online day trader.
6. Research your stock selections carefully. Online day trading should be approached seriously, and investments should never be made haphazardly. Your online trading account will provide you with an abundance of research tools to analyze the past performance of stocks. Following press releases and SEC filings on Yahoo Finance is another way to get up-to-date information on any stocks that you are considering.