Day Trading for Beginners

Day Trading Basics

Day trading requires knowledge which can easily be learned. The beginner can start by reading day trading books such as "Analyzing Bar Charts for Profit" by John McGee, or "Classics II: Another Investor's Anthology" by Charles Ellis. The new day trader can read online articles on day trading (see Resources). Avoid signing up for day trading seminars that charge money. There's no reason to spend money to learn the same information which others offer for free, such as the Mr. Swing website (see Resources). Whichever option you choose is fine, the bottom line is that you get as much knowledge and information about day trading prior to committing any of your money to trading.

Opening an Online Account

Once you complete the task of information and knowledge acquisition, you are now ready to open your online trading account. There are numerous online brokerage companies; you have to compare the rates of commissions charged for entry and exit from your position. Brokerage commission fees may vary from the low $6 per trade to as much as $35 per trade. The discounted online brokers charge much lower fees than the traditional brokerage firms. Another consideration for you might be the minimum deposit needed to open the trading account. Many online trading accounts may require a deposit from $500 to $2,000 or more.

Simulated Trading or Paper Trading

Before commencing online trading, it is advisable that new investors sign up for a paper-trading program. This is offered by most online brokers. It is very important for you to test your skills in trading without using actual money. You will buy stocks through paper-trading simulated accounts as if it is an actual trade. The price you pay for the stocks are real-time prices, and all costs are factored in. Through paper trading a new investor may develop and try her hands in trading without losing money in the process. You can paper trade for as long as you want, there are no restrictions of time, so the beginning investor has all the time she needs to perfect her trading skills prior to trading with actual money

Resistance Lines

Stock resistance line is a price level or zone generally above the current price range. The selling pressure in the market is generally sufficient to stop a further price advance The resistance line symbolizes the level at which the market has a hard time breaking through to an upside position. When price advance reaches a resistance point, failure to penetrate such point means that the stock price will begin moving in a sideways position or it reverses direction and starts moving downwards.

Support Lines

Stock's support level is the opposite of resistance level. It is the price level at which the stock price stops moving downwards, increasing purchases by investors causes it. As the stock price reaches a support point, investors will purchase shares feeling that the issue is oversold. Technical analysts chart stock prices to determine support levels and plan to purchase such stock when prices reach such point. Day traders generally use support and resistance points to initiate trades. Stocks generally move up and down. Sometimes, it may move in one direction for an unspecified period of time, but one pattern that is common in a one-day trading chart is that a stock may go up and down to its previous range many times over. The strategy often employed by day traders is to identify the trading range through lines of resistance, and then buy or sell when such conditions are met.

Trend Trading

One of the most important things that day traders do is to follow the trend. Stock prices move up and down in the course of a day's trading, a stock may move up and down within the support and resistance points many times over. Day traders make their money by trading within the trends, and until the price goes above or below those established support and resistance lines, traders will continue to trade with that trend until a new trend emerges