Daniel Pessin on Beginner Tips When Day Trading

By Daniel Pessin

Hi my name is Daniel Pessin and this blog will be to document my journey as a day trader. As a beginner, I’ve been learning a lot. I haven’t even started trading yet. Here are a few things that I think all beginner traders should be thinking about.

1. Education Is Vital

It’s important for traders to keep up on the latest stock market news and events that affect the market. This can include the Federal Reserve System’s interest rate hikes, other indicator announcements, and any economic, business, and financial news. A lot of the decisions made by the Fed have a huge impact on the overall market and it’s very important to be aware of all of these events.

2. Decide your risk to reward ratio

On each trade, how much are you willing to risk and what’s your target profit? Many successful day traders risk less than 1% to 2% of their accounts per trade.  This means if you have $50,000 in funds in your trading account and you are willing to risk 1% of your capital on each trade, your maximum loss per trade is $500 (0.1 x $50,000). As an important side note, if you lose 3% in 1 day, you should stop trading for the day. You are clearly not in the right head space or not having a good day. Tomorrow is a new day! “Personally I like to have a 2:1 risk to reward ratio” Daniel Pessin said. “This way if you lose 2 times, and win 1 time, you should be about even.” Of course the goal is to win more than you lose though.

3. Timing is everything

“Did you know that the prime trading hours are from 8 AM to 11 AM EST time?” Daniel Pessin said. During this time, there is the most volume in the market and patterns and charts are often more predictable. That’s why most traders do a majority of their trades during this time frame. Day trading requires your undivided focus. If you are serious about trading, make sure you are able to have 100% of your focus on the market during this time frame. Stocks move quickly and you don’t want to miss any opportunities!

4. Practice Paper Trading

As a beginner, it’s recommended to paper trade for at least 3 months before you start trading with a live account. There are many reasons, but the main reason is that you can practice and prove to yourself that there is a good chance you will be a successful trader. You should be able to grow a paper account for at least 3 months in a row before trading with real money. 

5. Stop Losses

It’s very important that you set a stop loss when you trade. What’s a stop loss?  Stop loss is basically setting the maximum amount you will lose on a trade. When you enter your position, it’s important to determine your stop loss immediately and automatically set your stop loss. This way, it’s not an emotional decision for you. For example, at any point during your trade, you lose 1%, your position will automatically be closed and you will take a 1% loss. This way you don’t hold on to a losing position and end up having a much worse loss, like a 10% loss. For a more technical definition of a limit order, check out the investopedia definition on limit orders.

6. Limit your emotions

“Controlling your emotions is one of the most difficult parts about trading,” Daniel Pessin said. “Greed, hope, and fear are strong emotions that could influence the way you trade.” You want to take the emotion out of trading. This is why it’s important to have a plan, which leads us to our next point.

7. Have a Plan

Successful traders have a plan. They don’t just trade on a whim or make a trade based on emotion. It’s important to enter a trade only when certain conditions have been met. What conditions? That’s up to you to decide. You are in control of what conditions need to be met before entering a trade. In addition, after you enter a trade, it’s important to set a stop loss and have a target profit zone. This way you will make sure your risk to reward ratio is kept in check.

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