Best Guide for Beginners on Day Trading

Categories: CFD Trading  

Tags: Trading Malaysia  Day Trading  

Publish date: 2023-9-1

Are you interested in day trading, but don't know where to start? Don't worry! In this article, we'll provide you with the best tips for beginners on day trading. We'll cover everything from the basics of day trading to the most important strategies and tactics you need to know. With our help, you'll be ready to start your day trading journey in no time!

Table of Contents

  • What is Day Trading?
    • Advantages and Disadvantages of Day Trading
  • Getting Started with Day Trading
    • Education and Research
    • Setting your Day Trading Goal
    • Choosing a Market
    • Selecting a Broker
    • Creating a Trading Plan
    • Practice with a Demo Account
  • Day Trading Strategies for Beginners
    • Scalping
    • Breakout Trading
    • Momentum Trading
    • Range Trading
  • Risk Management in Day Trading
    • Setting Stop Losses
    • Managing Risk with Position Sizing
    • Calculating Risk-Reward Ratio
    • Avoid Emotional Trading
  • Useful Tools and Resources for Day traders
    • Trading Platforms and Software
    • Technical Indicators
    • Trading Journals
    • Trading Communities and Forums
  • The Bottom Line

What is Day Trading?

Day trading is a popular trading strategy where individuals buy and sell financial instruments within the same trading day, aiming to profit in a short-term price movement in the market. This means that all positions are closed before the end of the trading day, and no positions are held overnight. Unlike traditional investors who may hold positions for weeks, months, or even years, day traders seek to capitalize on market volatility by making multiple trades throughout the day.

Advantages and Disadvantages of Day Trading

Some of the advantages of day trading is that it allows traders to make quick profits. Since positions are closed within the same trading day, traders can take advantage of short-term price movements and make profits without having to hold positions for a long time. As day traders do not hold positions overnight, this also reduces the risk of being exposed to unexpected market events that might occur outside of trading hours. 

However, day trading also comes with its own set of disadvantages. One major disadvantage is that it is quite time-consuming. Day traders need to constantly monitor the market and make quick decisions, which can be stressful and exhausting. Additionally, while day trading can be profitable, but it is very risky as traders can lose money if they make the wrong decisions. This pressure of making quick decisions and potential for losses can cause great emotional stress to the day traders, which impact their health seriously.

It is important to note that day trading is not suitable for everyone. Before starting, it is important to assess the level of risk that you are willing to take on, as well as your trading goals and objectives. Additionally, it is important to have a good understanding of the markets and trading strategies in order to be successful. Later, this article will teach you how to get started with day trading and the important day trading strategies to become a successful day traders.

Getting Started with Day Trading

Getting started with day trading involves several key steps to help you build foundation and set you up to the path of success. Here's some of the steps to begin your day trading journey:

Education and Research

Assuming you are a beginner to day trading, it is vital to learn all the basics of day trading first. Familiarize yourself with the fundamental concept of trading, including trading terminology, how market function and the market types such as stocks, forex, commodities, cryptocurrencies and so on.

Research and study how to analyze the market in terms of technical analysis and sentiment analysis etc. These are essential tools to help you to make informed trading decisions that increase your chance of success. Reading books and joining courses help a lot if you have the budget as they provide valuable insights into day trading strategies, risk management and psychology.

Setting your Day Trading Goals

Defining your goal is very important as it helps you to be aware of your progress and expectations. Whether you want to be generating additional income as part-time or becoming a full-time trader to achieve a long term financial goal. Managing expectations are essential as day trading is not a guaranteed path to wealth, there will be profit and losses as well.

For example, setting goal such as making $5 dollars per day to start with, and then go big from there. Day trading is a long journey that requires resilience and discipline in order to achieve success.

Choosing a Market

Researching and exploring different markets such as stocks, forex, commodities and cryptocurrency to determine which aligns with your interests and trading style. As different markets have specific trading hours, choosing a market that suits your availability and time zone would be crucial.

In order to be a successful day trader, you also need to understand market indicators such as moving averages, volume, and price patterns. These indicators can help you identify trends and make informed trading decisions.

Selecting a Broker

After the market of your choice has been chosen, a reliable broker comes next. Choosing a reputable and regulated broker helps to ensure the safety of your funds and ensure fair trading conditions. Make sure to evaluate the trading platform's features, usability, charting tools, and order execution speed to ensure it meets your trading needs. Comparing fees, spreads, and commissions can also help to find a broker that offers better trading rates.

After selecting a broker, you will need to set up a trading account with the broker. All you need to do is provide some personal information and financial details to open an account. Once your account is set up, you can start trading right away.

As a recommendation, FXCM is one of the leading global broker that has various markets such as commodities, cryptocurrencies, forex trading etc. Here's a list of why you should do day trading with FXCM:

  • Wide range of instruments to choose from
  • Excellent trading offers
  • Licensed and regulated
  • Professional tools provided

Creating a Trading Plan

Before starting anything, it is always wise to have a plan, even if sometimes it does not go as planned. Trading plan includes defining trading strategies to use that align with your market analysis and risk management skills. Some of them include scalping, momentum trading, breakout trading and so on. Outlining entry and exit rules based on technical or fundamental analysis are also vital to include in the plan as it helps to determine when to enter the trade, setting stop-loss and when to exit.

Determining how much of your capital you're willing to risk on each trade (usually a small percentage) can help to set stop-loss clearly for limiting potential losses. Basically, a trading plan needs to outline the trading strategies, how to manage risk, when you should enter and exit the trades.

Practice with a Demo Account

Last, but not least, before using real money, it might be wise to practice with a trading demo account first. Many brokers offer demo accounts that allow you to practice trading with virtual funds in real market conditions. By utilizing this, it can help to refine your trading strategies and build confidence in your trading skills. Coincidentally, FXCM also provides a demo trading account for free to every trader that is interested. Feel free to try it out and start your trading journey right away.

Day Trading Strategies for Beginners

As mentioned in the previous section, day trading strategies are important to include in the trading plan before you start day trading. There are several day trading strategies that beginners can use.


Scalping is a strategy where traders make multiple trades throughout the day, aiming to profit from small price movements. This strategy requires quick decision-making and a high level of concentration.

Breakout Trading

Breakout trading is a strategy that seeks to capitalize on the sudden increase in price when a security breaks out of its trading range. Traders use technical analysis to identify the range and then watch for a breakout.

Momentum Trading

Momentum trading is a strategy where traders buy stocks that are trending upwards and sell stocks that are trending downwards. This strategy requires traders to identify trends and act quickly.

Range Trading

Range trading is a strategy where traders buy stocks at the bottom of a range and sell them at the top of a range. This strategy requires traders to identify support and resistance levels and make trades accordingly.

Risk Management in Day Trading

Risk management is an important aspect of day trading. As a trader, it is wise to not only look at the profit, but the risks involved as well. While day trading is a high-risk, high-reward investment, we can try to minimize the losses by utilizing these risk management strategies.

Setting Stop Losses

Setting stop losses is a crucial part of risk management in day trading. Stop losses orders can help to automatically close a position at a predetermined price level. This can help to limit your potential losses if the market goes against you.

Managing Risk with Position Sizing

Position sizing is basically determining the maximum percentage of your trading capital you are willing to risk on each trade. A common rule of thumb is to risk 1-2% of your total capital per trade. This can help you to manage the risk by avoiding too much money lost on a single trade.

Calculating Risk-Reward Ratio

In any kind of trading, not just day trading, calculating the risk-reward ratio is very crucial to gain profit while minimizing the loss. While it may be troublesome, the reward can be very juicy once you have mastered this strategy.

A favorable risk-reward ratio would be of at least 1:2 or higher. This means that the potential reward for a trade should be at least twice the potential risk. To calculate the risk-reward ratio, determine the distance from your entry point to your stop-loss and take-profit levels before entering a trade.

Avoiding Emotional Trading

Emotional trading can be a major source of risk in day trading. It's important to stay calm and rational when making trading decisions, and to avoid making impulsive trades based on emotions. A good tip to overcome emotional trading is to stick to your trading plan even if fear or greed start to get ahead of you.

Useful Tools and Resources for Day Traders

There are several tools and resources that can help day traders make informed trading decisions.

Trading Platforms and Software

Trading platforms and software can help you analyze the market and make trades quickly and efficiently. Some popular trading platforms include MetaTrader, NinjaTrader, and TradeStation.

Technical Indicators

Technical indicators are tools used to analyze the market and identify trading opportunities. Popular indicators include Moving Averages, Relative Strength Index, and Bollinger Bands.

Trading Journals

Trading journals are a great way to track your progress and review your trading performance. Keeping a journal can help you identify mistakes and develop better trading strategies over time.

Trading Communities and Forums

Trading communities and forums can provide valuable insights and advice from other traders. Some popular trading communities and forums include Reddit's r/DayTrading and Elite Trader.

The Bottom Line

In conclusion, day trading can be a potentially profitable, but highly challenging way to trade in the market. It requires a combination of skills, knowledge, discipline and risk management to gain success in this trading journey. However, by following the tips and strategies outlined in this article, beginners can start their day trading journey with confidence in no time at all.

[Disclaimer] The articles above are purely personal opinions and are not intended to be investment advice. Only for the purpose of mutual learning and sharing. There is no express or implied warranty regarding the accuracy or completeness of the above-mentioned information. Anyone who relies on the information, ideas, or data contained in this article does so entirely at their own risk.