Day trading is any kind of market position which will only be held for a very short period of time. A trader will generally open and close their position on the exact same day. That being said, certain positions will be held for a prolonged period of time.
If you look at positions on an online trading platform such as Weiss Finance, you may notice that a position can be long, if the buyer happens to purchase straight away, or known as short, which is when shares are “borrowed”, only to be sold later on at an agreeable price.
A day trader is someone that will want to make the most out of the volatility levels of a particular trading day, while simultaneously attempting to lessen the attached “overnight risk” which is caused by instances such as a surprising series of bad earnings, which often occur once markets have closed.
The Beginnings of Day Trading
Despite how popular and successful day trading is today, the early 1990s saw this trading form coming in with a rather shaky series of opinions from investors. Many people were rather skeptical about this new trend in trading, and were rather hesitant, despite how many were jumping aboard.
Obviously being a fledgling trading style that was running on no previously tested formulae or stock trading strategies raised some eyebrows. The worst possible scenario that people believed they could get away with was the very casual and sloppy trading style they thought was possible from the comfort of their beds.
Not to be Taken Lightly
The above-mentioned people – those that approached day trading (and continue to do so today) in such an inappropriate will generally end up losing a lot of money and time when they find that their lazy applications do not work out.
Day trading is in fact something which needs to be treated with the opposite kind of demeanour and industriousness. You will have to be constantly up to date with the daily movements and trend behaviors in whichever market you happen to be invested in, and you will have to work with whichever stocks you happen to be activating in that day – often for several hours at a time.
Some Tips to Make the Most out of Day Trading
Looking for Suitable Entry Points – Drastic Imbalances
You may find that the financial markets are not so different from the other processes and ongoings in your life. The truth is that within a market, whenever a supply is coming to its end, and there still appears to be a host of eager buyers, the price will indeed begin to escalate.
On the other hand, if there are too many items in stock, that do not have a large group of interested buyers, the pricing will begin to plummet. You need to ensure that you have been trained to the level where you can differentiate between the former and latter situations, and know which entry points will end up being the most rewarding.
The Importance of Setting Price Targets
Whenever you happen to be interested in a long position, you need to make up your mind regarding how much profit you you find to be acceptable, as well as what your stop-loss level will be if the particular trade happens to go sideways.
In the next few steps you will definitely want to follow through with your strategies. Such persistence will ensure that your potential loss is kept to a minimum, and that your own greed never spikes too dangerously if prices happen to escalate to untenable levels.
There are, however, exceptions to this rule. If you happen to find yourself in a strong market, it is indeed advisable to search for the opportunity for the setting of a new stop-loss level and profit goal upon meeting your initial target.
Having Enough Free Time
Day trading is a demanding game. You need to ensure that you indeed have enough hours every single day which you can dedicate to participating in the market. This is such a touch and go, make or break arena of trading – the more time you have spare to participate in it, the better for your profit.