Everything Aspiring Day Traders Need to Know Before Starting to Invest

For anyone scrolling through r/WallStreetBets or other popular online investing forums, it’s easy to come across users sharing screenshots of surging portfolios. Many of the trades feature same-day gains.

These successes are often the result of day trading, the high stakes art of buying and selling securities within the same trading period, typically within a few hours of each other, if not less.

Many retail investors have been drawn to this world. New research from the JPMorganChase Institute shows that the share of 25-year-olds using active investing accounts had increased sixfold from a decade prior.

One major force behind that is Gen Z investor FOMO, which is driven by a seemingly endless flood of social media posts from seemingly regular people posting their trading successes.

But before you blindly follow the herd and embark upon an attempt to day-trade, it’s helpful to proceed with caution and make sure you fully understand the nuances. That means taking the time to truly become familiar with the many forces that drive the market and understand the risk that comes with it.

What beginners need to know about day trading

While discussing the risks posed by day trading, many experts stress the importance of not underestimating market volatility. That means taking the time to properly understand the forces that drive it before making any trades.

“Beginners should use objective measures like the Average True Range (ATR) and implied volatility to gauge volatility,” advises Alex King, day trader and founder of financial education platform Generation Money.

He continued: “From a practical point of view, beginners should set strict loss limits per trade and per day or themselves and be prepared to reduce position size or step aside if stops need widening.”