All you Need to Know about Day Trading
Day Trading. Living without money is always a hard life for in the today’s world money is used everywhere. The task of being able to define where the money comes from, what money is and what is its worth, it is for those who are in line with the discipline of economics. In the ancient days, no one ever thought of money for people would barter goods for goods. It was confusing because it was hard to know the amount to trade for a different product and if it was worth it. That is when commodity money chipped in hence functioned as a currency.
There are different types of currencies such as the British pounds, the US dollars, European euros and Australian dollars. When traded in Foreign Exchange Markets, the values of the different currencies are determined.
Forex is a short form of the word Foreign Exchange. Most people know it by the name currency trading. The foreign exchange market is a liquid market in the world and the largest too. When you get to travel overseas, you have to make a Forex transaction. For if you travel you have to convert your currency to their currency. The Forex exchange is what determines how much you will get. There are four different types of Forex traders: the day trader, the swing trader, the position trader and lastly the scalper. Today we going to talk about the day trader.
What is Day Trading?
Day trading is a discipline that most people know to be a way to participate in the financial markets. It is the buying and selling of different financial services and instruments. Day trading is carried out within intra-day time and short-term frames. They aim to gain profits by entering and exiting a market frequently. They don’t buy or sell a security and wait for weeks for capital appreciation. No, they take different small gains and losses each day in the effort to pursue an active bottom line. Everyone always wants the profits to outweigh losses.
Time denominations for the day trading are in hours, minutes and seconds, not like the swing trading where it is a long term trade denominated by days, weeks or even years.
The Pros & Cons of Day Trading
Day trading being a short- term currency trading in the forex market, its participants have several prominent advantages:
- Opportunity: In day trading there are better learning opportunities for the intraday trading can give you an opportunity for you to learn, test and also be able to apply most trading techniques in the short time span given.
- Leverage: The pairings for the forex currency are traded heavily thus the leverage is used to purchase or even sell large currency quantities. Many brokers provide a hundred percent leverage, leaving you to trade with more than what you have.
- Returns: the returns are very high if the strategy undertakes lots of discipline hence you have to learn how intraday fluctuations happen and be able to handle them.
- Liquidity: The amount of trading that takes place daily is massive thus you can interact with the market efficiently.
Some of the disadvantages are:
- Stressful: Day trading is stressful since there is a high risk of burnout. You have to keep watch and act quickly to spot trading opportunities. If there is no concentration maintained, it can lead to burnout.
- Major start up and ongoing costs: you have to spend more on trading platform as well as when you are starting up due to competition from high-frequency traders.
- Substantial losses: there is a high risk for this since in the day traders first days of trading they suffer from losses and hard to graduate to profit-making status.
What does it take to be a Good Day Trader
Day trading is not for everyone. The below shows how one has to be to be a good day trader.
I. You have to have a broad knowledge of technical analysis.
II. Have a high-speed internet and dual monitor.
III. Have to be hardworking.
IV. Have to be a patient person for it takes a while till you start making profits
Successful Day Trading Strategies
Strategies are to help you to increase your chances to make more money and also to reduce risks. The following strategies will make day trading successful for you.
- You should closely monitor real time scales data for it can be crucial. Should patiently wait for strong demands for this can lead to hefty profits.
- Have reliable sources for real time news. Know about all the events that can affect the stock market to decide whether you will buy purchase new instruments or sell your current holdings.
- Decide on which service you need during the stock exchange. You need to be careful when deciding on your favored instrument for every instrument there are risk and quirk levels.
- Before you take upon investment, you should have a stop loss order. It prevents you from the possibility of making a loss.
Day trading should be for traders that are patient and can easily accept the risks of this type of trading. It is a full time thus needs total concentration for you to be able to make a profit. Leverage is an attractive characteristic for people who want to be professionals in day trading.