Day Trading Introductions
Basic Day Trading
A while back trading in the stock market was only available through large financial institutions, brokerages, and trading houses. However, this all changed as our population and interest in the market expanded. Through the use of the internet, brokers have now made it quite simple and more accessible for the average trader to become involved in the stock market.
Day trading is simply defined as the purchase and sale of a security within a single trading day.This type of trade can occur anytime during the market hours and is typically completed by professional traders who are well versed in this field. These traders typically use high amounts of leverage in order to maximize capital in the short term. Day traders usually trade based on news or volume that move the market in the short term. If significant news or expectations are not met day traders tend to capitalize on these moments and lock in profits.
These are some strategies day traders may utilize:
- Scalping, These are attempts to make several small profits on tiny price movements during trading hours.
- Range trading, These primarily make use of support and resistance levels to decide if they are buying or selling areas.
- News-based trading, These usually seize trading opportunities from the heightened volatility around recent news
- High-frequency trading (HFT) These strategies use complex algorithms to exploit small or short-term market inefficiencies throughout the market day
Risks of Day Trading
Many professionals have debated this controversial practice of day trading. Many argue that this type of trading isn't worth the risk vs reward and shame the practice of day trading. Since no one is able to always make rewarding trades after calculating fees and losses they believe that the long term tends to benefit an individual more. Of course day trading is not meant for everyone and should be completed with caution because it does require practice and experience. Most day traders will fade out due to the harsh environment, but those that are able to stick with it can make large amounts of profits.
Day Trading requires a lot of time and effort in order for this to become a successful practice. For those that want to make a career out of this must be well versed in the field to come out on top. Many experts don't recommend this strategy to newer traders because of the risks.
Day Trading is a significant part of a traders strategy and has a place in the market. Though not meant for everyone this is one strategy of many that can help any trader improve their portfolio. Although this is popular among professional and unprofessional traders always learn from your trades and practice daily to become the best trader out there!