How to day trade successfully?
Day trading is a very good option for people who have time and can trade dedicatedly. We will introduce the concept of day trading and how to successfully trade in the market. We will cover some pitfalls of day trading and the tools that you may need.
What is day trading?
This term is used by people normally trading the stock or Forex markets. The word “day” has been added to the term trading to signify that the trade is concluded on the same day. Let us assume you have a $1000. You buy another currency say Euro worth $1000. On the same day, you sell it off. At the end of the day you have $1000 +/- the profits/losses.
How does day trader make significant money?
The movements of the markets are small on a daily basis. There are two ways of making money in day trading:
- Increase the number of transactions: So essentially you look for acceptable moves and trade multiple times within the same day. The positive side to this is that you do not incur heavy losses. You are able to invest the money multiple times thus leveraging it to the max. The negative side is that you have to be present and attentive every moment. You may have to guard your emotions well.
- Invest a lot of cash: We are looking to trade small movements in day trading. To increase the actual reward, we invest a higher amount so that the reward is multiplied and thus satisfactory.
The pitfalls of day trading
Day trading is really hard work. You have to be on your toes every second. Small things like breaking of internet connection can cause you to have losses. Since you trade small movements, sometimes you end up barely covering the brokerage charges. Choose brokerage packages that favour day trading.
The emotions run very high in day trading. Every small movement in the wrong direction can send jitters. You need nerves of steel and control to ensure that you do not panic buy/sell.
The tools
The fundamental analysis method will help the day trader to identify the currency pair or the stock they want to trade. Once the identification is done, you should rely on technical analysis to trade as the fundaments are unlikely to change on short notice.
You need to have a good information source. Listen to news, attend seminars, do some online research for reference and knowledge. Practice on demo accounts and check trades that you may have carried out.
Summary
Day trading is good for people who have the time and the tools. You can make money with day trading with low initial investment. You need to have patience and alertness to survive day trading. Technical analysis is used to chart the way to profits. It is recommended that you practice on demo accounts and check your trades before you start day trading.
