The foreign exchange market (forex) has a low barrier to entry, which makes it one of the world’s most accessible day trading markets. If you have a computer, an internet connection, and a few hundred dollars, you should be able to start day trading. As with starting any career, there is a lot to learn when you’re a day trading beginner. Not only will you need to decide what to trade and how much capital you’ll need, but you’ll have to get the proper equipment and software, determine when to trade, and of course, how to manage your risk.

Here are some tips to steer you in the right direction as you start your journey.

Choosing a Day Trading Market

You may already have a market in mind, but here’s the background in a nutshell. It comes down to what you like, but also what you can afford.

• The foreign exchange market, where you’re trading currencies such as the euro and U.S. dollar (EUR/USD), requires the least capital. You can get started with as little as $100, although starting with more is recommended.
• Trading certain futures markets may only require $1,000 to get started. There is also a wide assortment of futures available to trade. These are often based on commodities or indexes such as crude oil, gold, or S&P 500 movements.
• Day trading stocks requires at least $5,000, making this a more capital-intensive option.

Equipment and Software for Day Trading Beginners

You need a few basic tools to day trade:

Desktop, Laptop Or Mobile

Reliable, Quick Internet Connection

The slowest speed offered by your internet provider may do the job, but if you have multiple web pages and applications running, then you may notice your trading platform isn’t updating as quickly as it should. If your internet goes down a lot, see if there is a more reliable provider.

A Trading Platform

Download several trading platforms and try them out. Since you are a beginner, you won’t have a well-developed trading style yet, so just try a few that your broker offers and see which you like best.

Supportive Broker

Your broker facilitates your trades, and in exchange charges you a commission or fee on your trades. Day traders want to focus on low-fee brokers since high commission costs can ruin the profitability of a day trading strategy.

That said, the lowest fee broker isn’t always best. You want a broker that will be there to provide support if you have an issue. A few cents extra on a commission is worth it if the company can save you hundreds or thousands of dollars when you have a computer meltdown and can’t get out of your trades.

Major banks, while they offer trading accounts, typically aren’t the best option for day traders. Fees are typically higher at major banks, and smaller brokers will typically offer more customizable fee and commission structures to day traders.

BEST TIME to TRADE

As a day trader, both as a beginner and a pro, your life is centered around consistency. One way to generate consistency is to trade during the same hours each day.

• For stocks, the best time for day trading is the first one to two hours after the open, and the last hour before the close. You want to get good at trading between 6:30 pm and 8.30 pm GST because this is the most volatile time of the day, offering the biggest price moves and most profit potential. Some sizable moves also occur during the last hour of the day—12 a.m to 1 a.m. If you only want to trade for an hour or two, trade the morning session.
• For day trading futures, around the open is a great time to day trade. Active futures see some trading activity around the clock, so good day trading opportunities typically start a bit earlier than in the stock market. Focus on trading between 6:30 pm and 8 pm. GST. Futures markets have official closes at different times, but the last hour of trading also typically offers sizable moves to capitalize on.
• The forex market trades 24 hours a day during the week. The EUR/USD is the most popular day trading pair. This currency pair typically records greater trading volumes between 10 a.m and morning GST., when the London markets are open. And the hours of 4 p.m to 7 p.m. GST typically produce the biggest price moves because both the London and New York markets are open.
• Cryptocurrency trading is a 24/7 market. So whether you’re buying Bitcoin or one of the other 2,500+ cryptocurrencies, prices fluctuate a lot. Most liquidity is around 8am when European markets open, and 5pm when European markets close.

Manage Your Day Trading Risk

Trade Risk

Trade risk is how much you are willing to risk on each trade. Ideally, risk 1% or less of your capital on each trade. This is accomplished by picking an entry point and then setting a stop loss, which will get you out of the trade if it starts going too much against you.

The risk is also affected by how big of a position you take, so learn how to calculate the proper position size for stocks, forex, or futures. Factoring in your position size, your entry price, and your stop loss price, no single trade should expose you to more than a 1% loss in capital.⁶

Daily Risk

Just as you don’t want a single trade to cause a lot of damage to your account (hence the 1% rule), you also don’t want one day to ruin your week or month. Therefore, set a daily loss limit. One possibility is to set it at 3% of your capital. If you are risking 1% or less on each trade, you would need to lose three trades or more (with no winners) to lose 3%. With a sound strategy, that shouldn’t happen very often. Once you hit your daily cap, stop trading for the day.

Once you are consistently profitable, set your daily loss limit equal to your average winning day. For example, if you typically make $500 on winning days, then you are allowed to lose $500 on losing days. If you lose more than that, stop trading. The logic is that we want to keep daily losses small so that the loss can be easily recouped by a typical winning day.

From Demo to Live Trading

Therefore, if you notice that your trading isn’t going very well when you start to live (compared to the demo), know that this is natural.

As you become more comfortable trading real money, increase your position size up to the 1% threshold discussed above. Also, continually bring your focus back to what you have practiced and implement your strategies precisely. Focusing on precision and implementation will help dilute some of the strong emotions that may negatively affect your trading.