Learn to trade – the best tips to get started day trading

Earning a lot of money in a short time – this is the goal of many people nowadays. With Daytrading this dream seems to be able to become reality, the business sounds superficially nevertheless very easy. However, in addition to great stamina, you also need a certain amount of know-how to be able to earn money in the long term with this investment strategy. In the following we will tell you the best approach to day trading and what risks to be aware of. The most important things in a nutshell and our best tips and recommendations right at the beginning!

Learn to trade – recommendations& Tips

Learn to trade – the most important things in a nutshell

Learn to trade - the best tips to start day trading

How day trading works?

The term day trading refers to short-term trading on the stock market. The trader opens a trading position within one day and closes it again on the same day. The goal is to profit from the price fluctuations within the day. The speculation objects are not only shares, also with cryptocurrencies, foreign exchange and derivatives can be traded in day trading.

Tip: If you are interested in long-term investment, you can find more information in our guide article on ETF savings plans.

Day trading – not a new phenomenon

Especially on social media platforms such as Instagram and Twitter can be read more and more often about day trading. But the origins of this trading style go back several decades. Thanks to the introduction of the Electronic Communication Network (ECN) in 1969 in connection with the NASDAQ system (National Association of Securities Dealers Automatic Quotation) from 1971, day trading became possible. Stock trading was digitized and made available to the general population of the U.S. through the founding of TradePlus in 1982.

These taxes apply to day trading

In Germany investors have to pay taxes on their capital gains. This also applies to day trading profits. The maximum withholding tax is 25 percent. In addition, there is also the solidarity surcharge and, if applicable, the tax. Church tax (the amount depends on the federal state). The accruing taxes are independent of the domicile of the day trading platform, taxes are therefore also accrued by foreign trading providers.

Furthermore, for each person the basic tax-free amount of 9.000 Euro as well as the saver’s allowance of 801 Euro. According to this, if you earn less than 9.801 Euro, your profit is exempt from taxes. Any losses from day trading transactions can be offset against your profit.

Learn to trade – already known?

For capital gains, the personal income tax rate initially applies. If this is less than 25 percent, you have to pay less tax accordingly

Tip: If you have been charged too much tax, you can have it refunded via your tax return.

Become a day trader step by step

If you want to successfully start day trading yourself, we have summarized the most important steps for you in our guide below. Learn trading easily? How to become a daytrader step by step!

1. Prepare yourself extensively

Day trading is often sold as very simple. The trader is promised high profits in a short time. This tempts you to make short-term investments without first studying the matter in depth.

That’s why we recommend: Build up extensive expertise before you make your first trades. This way you minimize the risk of loss. Be aware, for example, that you cannot buy and sell your positions at any time, but are bound to the opening hours of the stock exchange. You can find even more exciting tips on the subject of buying shares in our guidebook.

Tip: Open an account with a day trading simulator. There you can make test purchases and sales with virtual money. This way you get a feeling for the price fluctuations and can do specific research if you have any questions.

Our recommendation: when choosing a trading simulator, make sure it meets your needs. Are the assets offered that are of interest to you? When to trade? Also pay attention to the costs – not every day trading demo is free of charge.

Learn from experienced investment professionals!

Even more expert knowledge about stocks, ETFs& Co. is available in our free online seminars. Fund managers, analysts, professional traders and other experts will answer your questions:

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2. Decide on a platform

There is a large mass of trading platforms. Therefore, do not use the first best, but compare the different platforms with each other before you open a securities account. Read the terms and conditions and make yourself aware of the fees and conditions. How to avoid negative surprises later.

Product recommendation: We recommend that you open a finances.net zero 1 Deposits. Here you can trade different asset classes without order fees. Account management is also free of charge.

3. Test your ideas: Use only “play money” in the process

No master has yet fallen from the sky. Be aware that it may happen that you incur losses in the beginning. Do not use large amounts of money for this reason. Instead, test your ideas with small amounts and increase them if you are successful. So you can try different assets at the beginning to become aware of the respective volatilities. Once you have found an investment object that suits you, for example a share, you should study it intensively.

Note: Some investors are successful for a long time by limiting their purchases to a few properties and have a lot of knowledge in these niches for it. Especially for beginners, we recommend a broad diversification in the portfolio to better balance strong fluctuations.

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4. Find a suitable trading style

Basically, you can distinguish between three different trading styles. In the classic day trading style, the trading position is held for a few hours on average. Often the trader has a clear price target in mind. When this is reached, sell immediately. So it can also happen that a position is closed again after a few minutes. Furthermore, there is the so-called scalping and swing trading.

With scalping, the holding time is shorter than with day trading. Positions are sold after a few seconds to minutes. In this way, often only small amounts of cents are generated. However, the more of these trades are executed within a short period of time, the more this method pays off.

Swing trading is the holding of trading positions for a slightly longer period of time. Sales are only made after a few days or even weeks in order to capture the highest possible profit. Rising prices can be fully exploited, but in return the trader performs fewer trades.

Important: You will find out which trading style suits you only when you have already made trades. Do not focus on a specific holding period at the beginning, but make the trades so that they feel comfortable.

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5. Create your own day trading strategy

When you have gained your first day trading experience, you should create a plan that you want to stick to in the future. How to avoid short-circuit reactions. After a trade, record your result and update your strategy if necessary.

A trading strategy should include the following points:

Risks of day trading

Day trading holds great potential for investors – both in terms of potential gains and losses. If the performance of a trading position is correctly predicted, investors can make big profits with just a little money. However, if you look at the facts and figures surrounding day trading, the trend in reality looks quite different. According to a study by financial expert Brad Barber, around 80 percent of traders make losses within a year. Viewed over a longer period of time, the number of people making profits continues to shrink.

In addition to the choice of the wrong trading object, psychological reasons also play a role. If a trader makes losses, he is more inclined to take risks on his next trade in order to compensate for the loss. You also have to consider the trading costs. Different order commissions and third-party fees apply depending on the trading platform chosen. Therefore, make yourself aware of the costs incurred before trading: the trades are only worthwhile if you make a profit after deducting the costs.

With a low-cost depot provider, it’s especially easy to keep those costs under control. Our broker comparison helps you find the right securities account. There we have reviewed both Internet banks and online brokers for their advantages and disadvantages.

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