A lot of people love to invest their money in stocks. While most people are content with a five to ten percent gain over time, some investors want more. For this reason, a lot of investors have turned to alternatives to make quick money. One of the quickest ways in which an investor can make money is by day trading.
When a trader speaks of day trading, they are speaking of buying and selling the security in the same day. In fact, many people will buy and sell the same security within a matter of minutes. A true day trade is a trade in which a trader closes their position by the end of the trading day. While it can be difficult to make money by trading stocks so frequently; it is possible to make a lot of money when trading stocks frequently.
When a trader wants to make money quickly, he or she must choose a solid broker. While most people do not care about execution time; a trader who wants to trade often must seriously research the cost and speed at which they can make a trade. Not only that, a day trader must not risk more money than he or she can afford to lose. A lot people lose money in the market, either because of terrible luck or poor trading skills.
The reality is, a trader can make a lot of money when they day trade. Though most people will fail, when a trader does solid amounts of research, he or she has a greater chance at success. One must remember, to make money in the market, a trader must develop a strategy. With that being said, a day trader should open a practice account so he or she can gain an understanding on how the market functions.
Day trading is a skill just like anything else in life
One does not simply start day trading and make massive amounts of money. day trading takes practice, persistence, determination, and courage. Large amounts of studying must go into your day trading business as well. Knowing all of the current news, trends, and patterns will give you an edge in the financial market. The goal of making a living off of day trading may seem like a dream, but it is possible to do. If you want to make a living off of day trading then you need to figure out a proper strategy that will work for you.
To start off, you need to determine whether or not you are looking to make day trading your main income. If you are trying to pay the bills with day trading, you are going to have to have a different set of expectations and goals then someone who is just looking to do it as a hobby or make a little additional income on the side. If you are trying to pay all of your bills through day trading, you need to try and set daily quotas for your trading. This can be hard, as there not only gains in the market, but also losses as well.
If you are ready to daytrade full time, and be your own boss, you need to make sure that you have a certain amount of self discipline. Working for yourself can be amazing because of the amount of freedom that you have, but don’t let that freedom get the best of you. Remember, you are replacing your full time income with day trading, and you need to treat your day trading just like a full time job. If you aren’t working from the open of the market to the close of the market, you aren’t working hard enough. You need to work from open to close to really make it as a daytrader.
Although a day trader’s profit may seem very small compared to those who make long term investments, it’s important to consider that day traders make many trades within each day, not just one or two. Some day traders may make up to 30 trades in a single day in order to multiply their profits. Tax planning is also an essential part of day trading, as profits may be taxed depending on the trader’s personal gains rate.
Day traders limit their risks by refusing to own stocks overnight. Prices can change radically from one day to next, which is why the key to day trading is making investments in extreme short term timeframes. Corporate announcements and news events drive the day trading market, so traders must be available to respond to changes in the market at a moment’s notice. Day traders must move extremely quickly and make decisions within several minutes, or even seconds, in order to benefit from changes in the market. Although snap decisions can be risky, they will usually pay off in the end.
Swing trading and position trading are two different types of day trading. Swing trading most often refers to the holding of a stake in a commodity or stock for a few days. Position trading involves holding a stake in a commodity or stock for several weeks or months. This type of day trading is a bit less fast paced than position trading, however, it is still much faster paced than long term investments, which can last for several years. All types of trading carry a certain amount of risk, and day trading is no exception. However, the risks of day trading may pay off with large profits if good decision making is practiced.
How to get started as a day trader
Many investors try their hand at day trading and ultimately fail. Day trading, though not complicated, requires a lot of research and preparation. Luckily, the average person can make serious amounts of money day trading, provided they follow some basic rules. Here are six rules every beginning day trader must follow.
- Practice without risking money: A beginner must open a practice trading account. With a practice account, one can make real-time market trades without risking any money. Ideally, a beginner should use the paper trading account for a month or two so he or she can feel comfortable making trades. Without a doubt, every new trader must open a practice account so he or she can develop a trading strategy.
- Choose a good broker: A beginner must choose wisely when choosing a brokerage account. Ideally, a trader should find a brokerage that offers exceptional customer service, quick trades and a software-trading platform. One must remember that trading is different from investing, and it is crucial to choose a solid brokerage firm when becoming a day trader.
- Avoid the opening market: The first 15 minutes of the market action are the most volatile and a novice should avoid trading during this time. A trader should start placing trades once the market has settled down.
- Avoid using margin: While using margin can help a trader make some serious gains, it can also leave the trader vulnerable to market downturns. A beginner must realize that one lousy trade on margin can wipe out months of gains.
- Cut losses before they turn catastrophic: When buying a stock, a buyer must have an exit plan. With an exit plan, a trader can minimize his or her loss and make sure that a trade does not turn into a massive loss. A day trader must remember that he or she should cut losses quickly and move on to trades that are more profitable.
- Do not rely on experts: When getting started, many novices try to follow experts for advice. While some experts may offer solid advice, a smart trader should develop their own strategy.
A beginner must realize how beneficial it is to do solid research and take time to learn about the stock market. A novice can make a lot of money once he or she develops a solid strategy. One must remember that a successful at short-term investor must have a lot of patience and some luck.
Road to success or to ruin?
One reason that Forex trading is so popular is because of its volatility; the changeability of the currency market means an investment has the potential to pay off quickly. This can be intoxicating to investors who have the heart of a gambler beating within their breast. It can also put a strain on the nerves as well as the heart.
Just how quickly a profit can be taken from a Forex trade will depend on whether the participant is involved in Swing Trading or Day Trading. Swing trading involves investing in a currency after having watched that currency and learned what factors are most likely to affect its movement. The trader develops a system to predict when several currencies will move as well as how the factors affect one will affect the others. Then the investor chooses one or two pairs that share a factor that affects them in opposite ways and watches events for the opportunity to jump into the market.
When the time is right the investor buys a currency he or she feels will increase against the value of another currency. The lower priced currency is purchased with the higher priced currency and then the investor waits for the values of the currencies to trade positions. He or she than exchanges the currency that has gone up in value for the now lower cost currency over a period of days and even weeks. Charts are used to determine the ideal time to sell one currency and buy another; stop orders may be used to automatically trigger a buy or sell order when certain benchmark prices are reached.
Day trading on the other hand uses the immediate and temporary effect news has on the currency market to make trades. Traders must watch closely as events unfold over the course of their waking hours and complete all of their trades and return their money to a safe haven before going to bed or risk leaving their investment unprotected.
Day traders usually, make very little off of each trade but by making several trades a day and dealing in volume are able to realize a good profit if their currency predictions are accurate. This type of trading is more akin to gambling then investing and relies more on gut instinct then rational thought. It is for this reason that day trading requires steady nerves; it takes very little to wipe out a day’s profits and send the trader into the red.
No matter where the market you’re looking at is located, whether it be the USA, Europe, Asia, you name it, they look to the US trade market for their inspiration. You can almost make your own hours in order to trade due to worldwide markets being open 24/7. It is recommended to follow the US trade market at the end of their trading day, 3:00pm EST. Watch to see what is trading up and what is trading down. This will give you a great idea of which way the upcoming day will go in other countries. This would be during the evening hours in the United States. In this way you’ll have a jump on those that don’t have this information.
The potential of a new day time job
This idea of day trading is not a new idea, nor is it a bad idea. People can and will continue to make huge returns on a daily basis using this method known as day trading. How do they do it you ask? Here are a few ways that day trading can be accomplished. First, if you have a full day off from work, then you might call into a broker in the morning before the markets open and ask them to open a day trade for you. This means that you chose a stock that you think is going to go up for the day. So what you do is invest how much ever you want in this stock, in hopes of it to rise by day’s end.
Then at the end of the day, you call back to your broker and ask them to sell off that stock, and if everything works right you just earned yourself a day profit on this stock, however don’t forget you will still have to pay comission on that trade. This is probably the easiest way to day trade.
This next way is about the same except, you open an online broker account, where you are in charge of the account, you do the same thing here purchase a stock in the morning and at the day’s end you sell it off.
This next way is a lot more skillfull, but this is how the big shots make money, they buy a trade in the morning and watch the trends all day long, when they see it hit a high they sell it off quick, this allows them to get max profit on that trade. This method if a person is knowledgable about the stock market, they can make a big return in a short amount of time.
Which ever method you chose, if you do it right and research the stock before buying it you should have good luck in your day trading, that eventually it could just like the title says become your new day job, or at least a part time job with a nice return on it, but remember its possible to loose as well.
Tips for successful day trading
The one thing that can make or break the level of success that a day trader experiences is patience. While it may be hard waiting for the next trade when one has lost or is losing money, patience is the key that will determine how successful an individual will be. The new and experienced day trader alike will benefit from having a working knowledge of indices and percentages. Percentages offer a good indication of how the stock has done in the past, its trading ratios and how well it will perform in the future.
Another thing that day traders need to keep in mind is both the liquidity and volatility of the stocks that they are trading. The liquidity of a stock is something that allows the investor to not only purchase, but also sell the stock at a decent price. This will allow for profits than losses.
The Volatility of a stock is when a day trader determines what the daily price range of a stock is. This will measure both the ups and downs of the stock and the price trends that it has experienced in the past and forecasting these trends to the futureIt can be the deal breaker when talking about profits and losses.
Day trading can be quite risky. The individual should be sure that the money they are seeking to invest will not bankrupt them if they lose it. Making sure that the individual day trader is up on what makes a particular stock a good investment and then being patient when actually trading the stock will be the main keys in the game of loss and profits.