Day trading has increasingly become a popular method of making money. While trading has been well-known for many years, its popularity became more in 2020 and 2021. At the time, most people were staying at home because of the Covid-19 pandemic. As such, trading became one way of making money.
Still, the reality is that many people usually lose money when they start trading. Estimates place the figure at about 80%!
This is because, caught up in the hype and fear of missing out on such an interesting opportunity, many people have started to 'play' in the financial markets without the right skills and knowledge.
In this article, we will look at some of the most important skills that every beginner needs to have as they start their trading journey. At the very least, to avoid major losses and not destroy your career in the first week.
In our many years in the market, We have learnt that patience is one of the most important skills that traders need. Patience is important in the market because of several things.
First, patience is fundamental because of the importance of learning and horning your trading skills. Therefore, you will need to be patient about your learning process. At times, the process could take you several months and even years before you become a good trader.
Second, you will need patience when doing the actual trading. For example, if you focus on a moving average crossover, it will often take time before the crossover happens. Also, at times, a trade could take time before you receive the real outcome.
Third, patience is also necessary because not all trades that you implement will work out fine. For example, you could go through an extended period of making losses. Therefore, instead of just giving up, you can decide to be patient and learn from these losses.
Adapting to market conditions
An interesting thing about the financial market is that market conditions are not always the same. A times, the financial market will demonstrate increased volatility. Traders love it when there is volatility in the market.
And in other periods, the market will go through a period of low volatility, This is usually one of the worst periods since there is usually nothing you can do but wait.
In other periods, the financial market will go through a hybrid condition when some assets are volatile and others are rangebound.
Therefore, as a day trader, it is important for you to have soft skills that will help you adapt to these market conditions. Doing so will help you navigate and be profitable in all market conditions.
» Related: 6 Easy Ways To Improve Your Trading Skills
Research and analysis
As a day trader, you will need to constantly do market analysis. This analysis will help you to identify when to buy an asset and where to locate the stop-loss and take-profit. There are several approaches to this when you are becoming a trader.
First, there is fundamental analysis that involves studying the prevailing market conditions and then making decisions based on this information.
Second, there is technical analysis that involves using technical indicators like moving average and the Relative Strength Index (RSI) to determine whether to buy and sell an asset.
Third, there is price action, which is an analysis method that involves looking at certain patterns like triangles and head and shoulders. Therefore, as a beginner trader, you need to have these market analysis skills (essential even for pros).
» Related: How to Analyze Stocks
Risk management skills
Risk management is an important concept in the financial market. Both beginners and experienced traders find risk management strategies useful because they ensure that they maximize their returns while reducing risks.
There are several risk management skills that traders should have. First, traders need to know more about how to place a stop-loss or a take-profit. With these skills, you will be at a good place to limit your losses.
Second, you need skills about coming up with a risk and reward ratio. In most cases, it is often recommended that traders should never open trades that expose them to a loss of more than 2%. Therefore, if you have a $1,000 account, the maximum loss that a trade can make you should be about $20.
Third, you need to have skills about how to manage risks and how to deal with losses. Sadly, this is where most traders fail.
For example, they often give up when they lose money or get overexcited when they make money. As a beginner, it is important that you learn to balance these scenarios.
» Related: Risks Associated With Trading in Financial Markets
Your trading platform
The next skill that you need is on your trading platform. There are many trading platforms in the market today. The most popular ones are MetaTrader 4 and 5 and TradigView. Others include the PPRo8 that we use here at Day Trade the World (DTTW™).
Even before you begin your trading career, it is important that you have good experience on your trading platform.
Trading is a popular way to make money either on a full-time or part-time basis. It is estimated that millions of traders are directly involved in the market on a daily basis. Therefore, it is an industry that requires a lot of skills. In this article, we have looked at some of the top skills that you need to succeed.