Investing

Day Trading question for Beginners

  • Last Updated:
  • Aug 12th, 2020 5:07 pm
[OP]
Newbie
Jun 17, 2011
2 posts
Markham

Day Trading question for Beginners

I know very little about finance and investment. I recently learned about day trading and would like to learn more about it. Not planning to invest any real money here.

From what I gather from YouTube videos, day traders usually prepare to go into the market with a plan. I found this very interesting because what they are doing is preparing for an educated guess of the market’s up and down.

I want to know what type of research a day trader would do everyday, how to filter out what is important and what is not? How they strategize when to buy and sell? And what type of platform they generally use?

Any experience day trading people out there can answer my question?
8 replies
Deal Addict
Dec 4, 2011
1310 posts
678 upvotes
Montreal
You don't day trade as a beginner investor is what I would tell you.
Member
May 2, 2019
359 posts
345 upvotes
Vancouver
vivianchan0103 wrote: From what I gather from YouTube videos, day traders usually prepare to go into the market with a plan. I found this very interesting because what they are doing is preparing for an educated guess of the market’s up and down.
It's not about guessing the next market move. It's about seeing what is happening already: any signs that big market players are buying (selling) or are about to buy (sell). Common filters are trade volume (as compared for normal volume for that stock) and % change for the day. There are many more components to it, and nobody is going to give you a complete solution. You'd have to put a lot of work (and even then, most people fail).

A word of caution: random Youtube videos may be like 99% junk. People usually have an agenda to sell you something or promote themselves without having actual knowledge. Try SMB Capital videos, those are legit.
[OP]
Newbie
Jun 17, 2011
2 posts
Markham
Thank you for your input. Again I am not planning to start any day trading. RRSP is complicated enough for me.

I just found it fascinating how people can predict the future market using today’s data. They have to be successfully enough to make a living out of it for years, that means it’s much more than pure guesses. I want to understand the basic methodology behind their madness.
Deal Addict
Nov 6, 2015
2967 posts
2114 upvotes
Calgary
vivianchan0103 wrote: Thank you for your input. Again I am not planning to start any day trading. RRSP is complicated enough for me.

I just found it fascinating how people can predict the future market using today’s data. They have to be successfully enough to make a living out of it for years, that means it’s much more than pure guesses. I want to understand the basic methodology behind their madness.
It's not about predicting the future, but learning to gauge probabilities...once you have spent many thousands of hours staring at the tape, you start to notice patterns that repeat themselves.
The idea is to only take trades with favourable risk/reward, let's say 2:1 (so you risk $1 to make $2). This way, even if you are right only 50% of the time, you will still be profitable.
Easy to preach, hard to practice :)
Deal Addict
User avatar
May 11, 2014
4102 posts
4434 upvotes
Iqaluit, NU
Successful day traders are ones that can gauge market/investor/human behavior as events occur. The planning going into it can entail whether to target stocks of specific companies, specific industries or utilize specific products such as leveraged ETFs or calls/puts. In general, as mentioned above it is a probability game. Success comes with ensuring that gains are in place while having stops in place or ways out to limit damage. To be successful in it, it also helps to understand what each investment instrument represents, the financials of companies/industries as well as the overall macroeconomic climate. While you can rely specifically on behavioral action, this can leave you in a lurch should a trade fail, as well as the fact that there is often action that we cannot predict nor the limitations of margin placed on your account.

As a famous example, read this
https://www.investopedia.com/articles/i ... e-106k.asp

This guy may have predicted the technical correct trend of the company (downward), the buyout which ended up not occurring wiped out his entire wealth. Mind you this guy held his position overnight, so not technically "day-trading" but the premise is the same. Markets are generally rational, but can stay or become irrational longer than you can stay solvent.

My best advice: don't go into it without at least understanding general investing concepts. I find those without this knowledge are even at a greater disadvantage when it is already hard enough.

Personally, I have done random short term trades especially when I think certain stock movements are irrational. They have paid off percentage wise, but fairly low dollar wise. I never bet the farm on these due to these high risks.
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Deal Addict
Jun 7, 2005
4368 posts
205 upvotes
I recommend the little blue book that beats the market by Joel Greenblatt. It's got a good basic overview of some things to look for, and how to pick a handful of stocks that will likely be safe investments. That will give you a good starting point to build a portfolio, and you'll learn along the way and make your own picks.

(Yes I know Greenblatt's ETF's haven't been able to match his theoretical performance, but I found magic formula investing to be a good starting point)
Deal Expert
User avatar
Apr 21, 2004
54066 posts
18990 upvotes
Is it possible to only trade securities that get halted with extremely good news released?

Like buy at the open and sell on strength?

I know nothing is idiotproof and I'm one of those when it comes to investing lol.

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