Day Trading - an Introduction
Day trading is the practice of active buying and selling of the stocks, options, futures and currencies within a trading day. All trades are completed within a day so that after the closing of market the day trader do no hold any open positions and therefore are not subjected to any overnight risks. The traders trade against very small changes in price of the financial instruments. Day trading is usually a vigorous trading activity requiring high concentration and time during trading hours.
Day traders can be grouped into two broad categories as scalpers and momentum traders. Scalpers trade in large quantities completing each trade within seconds or minutes. Most scalpers are usually large financial firms or investors like institutional traders. Momentum traders are usually individual traders who trade according to the stock market trends. The trading volume of momentum traders usually depends on the market condition. Some other popular trading strategies include range trading, news playing and rebate trading.
Day trading can be considered as an offspring of high speed electronic communication networks. Most day traders today trades markets from a distant location such as their home or work area. They use trading software, the direct access trading platform, installed in their computer connected to internet to execute trades in real-time. In order to qualify for the trades, the trader must maintain a margin in the corresponding market. It is the day trading broker who maintains the margin for the trader and provides the direct access trading platforms. Although there are web-based trading platforms available, they are not suitable for day trading.
The most important thing, other than the money, trading system and market account, that a day trader need is the market information. Market data enables day traders to pick suitable products to trade. Day traders need live or real-time market quotes as a small delay in information can cause them huge loss. It is the trading system that they use serve for this purpose. Advanced systems provide these information as graphics and are usually have alerts and triggers to automate trades. Day trading systems also use technical indicators and various mathematical tools to facilitate the picking of stocks, futures, currencies, etc.
As told earlier, there are a variety of products available for day trading. The most popular ones are the stock and the forex currencies. Others include options like stock options and futures options, and futures like currency futures, stock futures, stock index futures and commodity futures. Day trading facility is available for most stock, options and futures market, but note that most brokers offers services for limited markets/exchanges. The trader also must be keen to choose markets according to the product they are trading, their financial status, the brokerage they are affiliated to, the trading system they uses, and their geographical location.
The advantages of day trading include high profit making chance, no overnight risks, high leverage, rapid returns, no margin interests etc. The disadvantages include higher chance of loss (especially to new traders) and the requirement of high concentration levels and time. The requirement to payoff interest on margin and transaction costs can make the situation more serious. It is estimated that over 80% of day traders have to afford loss.
Praveen Ortec works for NobleTrading.com, a discount broker providing online stock day trading on 4 different online day trading systems. Checkout this online broker comparison table.
An Introduction To Day Trading
Many people often get confused by the financial terms such as currency, forex exchange, trading etc. Its a big complex financial world and one of the new trading concepts is day trading.Day trading in its simplest term means buying and selling securi...
Per Trade Profit Target - Day Trading Money Management Technique
Per Trade Profit Target - IntroductionWhen a trader first starts out in their day trading activities, they will usually start out with little or no idea of their trading style. The trader will enter the market with no fear and will achieve moderate ...
Day Trading Systems
Day trading is a style wherein traders either sell all long positions are sold or cover short positions at the end of the trading day. With day trading, you can be sure of finishing the day in cash and can therefore avoid the risk of holding the shar...
Forex Day Trading Systems
Usually, we associate trading with purchasing a commodity, bringing it home or to our business premises, and then selling it. Similarly, we purchase stocks and shares in the stocks and shares market, hold them until their value increases and then sel...
Electronic Day Trading
The computer age and the Internet revolution are the foundation for electronic day trading. It is through the Internet that you can have direct communication with the various traders and the stock exchange to facilitate easy day trading. With electro...
Day Trading Stock Tips And Lessons - Networking With Trading Industry Participants
Here is a day trading stock tip not often mentioned: networking. With the advances in technologies, lowered commissions, and certain "edges" no longer effective in the day trading industry, consider networking as often as possible.One of the appeals ...
Day Trading Stock Picks
Day trading stock picks are the best stock deals that are available for day trading. Awareness regarding day trading stock picks allows a day trader to gain maximum returns from the market. The day trader has to capitalize on intra-day price volatili...
Day Trading Futures
Day trading used to be the sole domain of the floor traders. They always have the advantage of bargains on commodities. They have the advantage of being able to judge the market breath, and thereby make the proper predictions with the correct price f...
Day Trading Systems, Do They Work?
Day trading is risky business. But like any other form of business, there are ways to prevent losses. One of them is by having a definite trading plan. And in order to have a definite plan, you need to know trading systems and how they operate.The fi...
Online Day Trading
Investors who trade online have instant access to their accounts and near instantaneous trade tractions. Because of this, it is important for traders to understand how to protect themselves when the market is moving fast. Fast-moving markets.When you...
