(Newswire.net — November 19, 2018) — If you’ve been dabbling in personal investments for long, you know that day trading comes with its fair share of risks. However, not every strategy has to compromise your investments. Discover four low-risk strategies for day trading that can help you take your investments further while keeping your chance of big losses to a minimum.
Follow the 1 Percent Risk Rule
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For day traders, it doesn’t matter if you’re starting with a little or a lot of capital. To mitigate risk, always follow the 1 percent rule, or aim to put only 1 percent of your total trading account at risk at a time. That means if you have $25,000 in your stock market account, you’ll want to keep your purchases to just $250.
With this strategy, you might not be able to go all-in on an investment you’re sure about. However, you’ll also protect yourself when a bet doesn’t pay off or when the market doesn’t perform the way you anticipate, giving you more protection in the long run.
Consider Buying Options
As an individual trader, you’ll have the opportunity to invest in everything from stocks to futures to foreign currency. While you’ll find great opportunities in many places, you may be able to lower your risk by buying options.
Although options aren’t as popular as many other strategies, they offer some unique benefits for day traders. They’re considered more efficient investments, they may offer higher returns, and they’re thought to be less risky than equities, all characteristics that make buying options a lower-risk strategy for day traders.
Rule Out Penny Stocks
When you want to lower your risk as a day trader, you might find yourself gravitating toward the most low-cost investments you can find, such as penny stocks. While penny stocks are certainly inexpensive, they’re known to be very poor investments for day traders, making them unnecessary risks.
To keep your risk level low, make a point of avoiding penny stocks entirely. With this strategy, you’ll save yourself from wasting time and resources on bad bets, and you can invest in well-researched trades instead.
Nail Your Timing
One of the easiest ways to lower your risk level is to perfect the timing of your trades. Few day traders operate continuously when the market is open, but most plan trades during the first few hours of the day or right before the market closes. That means the market tends to be most volatile during those busy hours.
When you’re getting started as a day trader, make a point of not making any trades during the first 30 minutes or so after the market opens. You’ll avoid making snap decisions without adequate research, and you’ll lower your overall risk.
Whether you’re just getting started with day trading or you’re looking for a more effective way to approach this niche, keeping your risk level as low as possible can help you manage money more effectively. Try these four low-risk strategies to give your day trading practice a boost without compromising your bottom line.