Six Steps to Profitable Daytrading:

Step 1:

Step 1 is finding out out what daytrading is all about and finding out an instrument (currency, index future) you would be comfortable daytrading with. This site contains almost all the information you need. Read as many articles/white papers on this site as you can. This will help you determining whether you would interested in daytrading index futures (such as e-mini S&P), currencies (Euro/USD), Commodities or stocks. Learn the pros and cons of each instrument. Study the leverage, liquidity, commissions, spreads, trading hours offered by each instrument. 

Step 2:

Find a good daytrading simulator to practice daytrading with. There are quite a few on the market such as ‘RapidSP’ (the stocks/currency/FOREX trading simulator offered on this site), ‘Market Skill builder‘ (offered at marketskillbuilder.com) and ‘The futures game‘ (offered at cavlogix.com).

Select one based on no. of features, available technical studies, different instruments that the simulator can trade, speed, etc. Look for simulators that use actual tick data rather than the ones that use minutely data. This is important since simulators using tick data will give you reality daytrading experience. Apart from these most of the brokerages offer their own daytrading simulators. Though these are good simulators the drawback is that they don’t offer high speed simulations so they may not be quite suitable for serious learning. But these are good to use to become familiar with the broker’s order entry systems, once you select that broker.

Step 3:

Try simulated paper daytrading with years worth of tick data for your choice of instrument. This should be easily achieved in few weeks with simulators that daytrade at speeds higher than regular market. Try different instruments. Find out what suits your financial goals, investment capital, liking, market hrs. etc. Practice till you get used to spotting good/bad situations or chart formations. There is a lot of information on this site that will help you at this stage.

Step 4:

Assuming you are making money in above simulations, on regular basis, you might be ready to open a trading account with a broker.  Choose one that suits your needs regarding commissions, instrument offering, support methods, reputation, offered trading tools, availability of paper trading etc.

Step 5:

Find a RTQ (real time quote system) and a broker to trade with. Select a RTQ that offers products that you like and a plan that suite your budget. At the same time, open a paper trading account with your choice of broker. If they don’t offer a paper trading account go somewhere else. If they use pressure tactics to get you to start trading immediately, change the broker. Make sure that you paper trade with your broker using your choice of RTQ for at least about a month. This step is necessary not so much as to learn trading (majority should be done in step 3) but to become familiar with the order entry tools offered by the broker and the RTQ interface. If you lose money during this month, go back to step 3. Work on what went wrong, try a different instrument. Did you lose money because of the broker/tools offered by the broker, RTQ? in that case go to step 4 again.

Step 6:

Assuming you made money in step 3 and step 5 you are about ready to start the real thing. There are still no guarantees and you still can lose money but your chances of making are improved many fold. Do not change the instrument or broker after this point. If you have to change your instrument or master another one, go back to step 3. If you need to change your broker for some reason go back to step 4.