The intention of investors is clear. Everyone wants to make money. There are multiple investment methods out there, from speculative day trading to long-term investing, where the grade of speculation, the involved costs and time requirements could not be more different. Nevertheless, no matter if you are planning to day trade or invest, there are five essential things to consider trading stocks on your mobile.
1. Stock Trading Apps
Investment decisions must be clearly structured with a specific trading plan and appropriate money management rules. Therefore, research is needed before an investment can be made.
The shorter the time frame and investment horizon, the more important stock trading app reliability becomes. While long-term investors can make investment decisions based on delayed end-of-day data on a daily chart, day traders require much faster tools. Using the best stock screener for day trading with real-time data, charting functionalities, ad-hoc news, and integrated brokerage APIs becomes beneficial since day traders compete with institutions and professional traders.
Most stock screeners work on any mobile device using the integrated browser. In addition, some platforms offer specific apps that can be installed on Android devices.
2. Brokerage Costs
Android App based trading platforms are free to use in most cases. Some of the most popular trading apps for Android devices are Robinhood and Webull. However, in some cases, day traders will have to pay for additional trading software with real-time market data feeds – for example, stock market data from the New York Stock Exchange or Nasdaq.
The brokerage costs for day trading stocks are typically $0 these days since most U.S. brokers introduced commission-free stock trading two years ago.
Brokerages outside the United States allow day trading with less than $25,000 in the account, while the SEC has implemented the $25,000 minimum for day traders using U.S. accounts.
3. Trade Execution Speed
An online stock broker executes trades at the best possible price by sending the buy and sell order as fast as possible to the stock exchange. The faster the order submission, the better for the day trader. The difference between the price a day trader aimed for and the executed price is called “slippage.”
In day trading, speed is everything, so the faster the order gets transmitted, the greater the potential profits.
Investors also need a fast internet connection and excellent trading infrastructure, like a new Android phone or, in addition, a personal computer with multiple monitors.
4. Trade Management
Before beginning with day trading, a diligent risk management plan is needed. For example, day traders often apply a 1% rule to each position. It means to only risk 1% of the bankroll on each trade. So, for example, if the current account balance is $30,000, the next trade’s risk is a maximum of $300!
The best way to archive this is by setting a stop-loss relative to the risked amount. Day traders tend to work with stop-loss orders for protection purposes.
Let’s assume that one just bought 100 shares of AAPL stock for $175 each. So the investment is $17,500 at the moment the order got executed.
Based on the example above, the maximum risk on that trade is $300. Therefore, it is needed to limit the potential loss to $300. That’s possible by placing a stop order $3 away from the entry price at $172. If the stop-loss gets hit, the investor loses 1% of capital.
If day traders do not set a stop and the stock drops sharply, for example, by $10 to $165, they would lose $1,000 just in one trade. Cut losses short and let profits run is an old saying and often true.
Taking profits requires the same discipline as implementing a stop loss. The entry and exit point will never be the best possible one. Day traders must take profits when they’re available.
The average profit aimed for should be higher than the maximum average loss. This way, investors make money even if half of the trades fail. Therefore, never forget to take profits.
Trading tools provide an edge, trading educators may help understand market behavior faster, but there is no shortcut in day trading.
However, every beginner should start the journey with free tools and a good stock market simulator. This way, no money will be put at risk, and investors learn a lot about day trading while studying the markets independently.
Forget about all those clever marketing illusions about day trading out there. There is no shortcut. Discipline is needed to make money and to succeed as a day trader. For that reason, it’s recommended to make rational steps. Once investors start making money, they can reinvest the capital made. Until then, stick with free resources like trading tools, stock chat rooms, YouTube videos and paper trading accounts.
The five essential aspects of day trading are a positive mindset, low brokerage costs, fast trade execution, excellent money management, and great trading tools.
Day trading is one of the most demanding ways of making money, and beginners should prepare for a minimum of 12 months before they see profitability in the paper trading account. However, once the day trading strategies are proven to work in the paper trading account, the trading can be started with small investments in the live trading account.
Statistics indicate that more than 90% of day traders fail, so day trading is not the path to unlimited wealth. But it can become an exciting addition to long-term investments on the way to financial independence.