In simplest terms, the act of buying and selling any financial product or element, within the same day, intending to make a profit, is more than likely known as day trading. It can either be done once per day or multiple times during the day, depending on the individual and the stock market. If played correctly, one can take advantage of small price changes, but it can also be a big disadvantage to those new at the game and do not have a well-planned strategy or action plan.
Typically, there are high volumes of trades made by those in this “industry” and not all brokers can keep up with it, as such is it always better to do it yourself if you have got the right knowledge and skills. This article touches on a few of the general principles attached to this type of activity and some of the common strategies that are played. To introduce yourself to the concept, you can do some further reading online on a few different sources such as this one, for instance.
What It Takes to Become A Day Trader
It may be easy to say that everyone can do it and do it successfully, but this would not be true. There are a few traits that one needs to be good at it, much like anyone who wants to be a professional soccer player or chess player, there are things that may be in their personality that can help them or in the act of practice and will power that can get them there. Let’s look at what these are for this kind of trading industry.
- Adequate Capital Your Willing to Lose
Let’s begin with the most obvious one, the capital. This is the funds that you, as a potential day trader will use to “play” with, the idea is that this is money you can afford to lose in the event this happens, and it will not affect your finances in any way. This money is like a kind of protection from any financial ruin, and from becoming bankrupt.
The reason for this is that when you first begin if you want to make more than just a dent in the numbers, you will need a large capital which is often the case with most beginner traders and for an effective trading day or month. The markets are volatile and you cannot control it, but what you can control is the amount of money you throw into it. Typically known as a “margin account”.
Knowledge of, and Experience in, the Marketplace
When you do not have a full understanding of the playing field, any sportsperson can it wrong in more ways than one and risk losing the game. Much in the same way is trading if you try to understand the fundamental while your playing, you may risk losing more than you would if you understand first, then play.
Understanding the ins and outs of the market place will lead you confidently through the winning post with ease. Refer to informative sites such as https://daytrademethods.com/, study a relevant course, or ask someone who is in the business to show you how to do it.
What Is Your Strategy?
And then comes your strategy, which is the make or break of the entire system you will be playing. There are several different kinds and we will touch on these below, however one needs to study them in-depth and figure out which one will suit them and their end goals the best, not to mention their lifestyle. This is how famous sports players become a winner because they have a strategy which they continuously use to beat their opponents because they know if they keep doing it, it will work.
For some, this is a full-time job. Depending on how much time you want to commit to it, you can decide accordingly which strategy fits it. You will need an edge over the rest of the players, and things such as keeping up to date with trading news, arbitrage, and trading information will help get you there. Once you choose the one for you, you will need to refine it until it becomes second-nature to you and start making profits consistently and limit your losses while you’re at it.
Below is a brief idea of 4 of these strategies used by professionals and people in the know.
Strategies of Day Trading Used by Professionals
Traders use a variety of different ones depending on their end goals.
Range trading is a strategy that chiefly uses provision and confrontation levels to regulate the individuals buying and selling decisions.
HFT or High-frequency trading uses sophisticated algorithms to beat the small or short-term market inadequacies.
News-based trading: this approach characteristically snatches trading opportunities from news events around it and the heightened volatility that surrounds it.
Scalping: this one attempts to make frequent but minor profits on prices changes throughout the day and could take longer than the others to achieve the desired numbers.
What Tools Can You Use?
This is something that requires the right tools, and by this we mean, there are a few options of day trading software available to those who are serious about it. Namely “automatic pattern recognition” software identifies technical indicators like channels and flags. Then you can get the “backtesting” which allows traders to study different strategies that have worked in the past more accurately and how the future is looking for it.
“Broker integration” is also available to some, which is an application that works with a brokerage and helps in eliminating any emotions in the trading and help improve execution actions. Lastly, there are the “genetic and neural applications” which are comprised of algorithms or a specific list of rules, that can help perfect the system to help make more precise predictions and predictions.
We hope the above information helps you decide if you’re the right kind of person to take on this “path” and make something out of it. Happy trading!