Day Trading
Day Trading–Trading Done in a Day
Day trading is a type of trading wherein stocks or any financial instrument is bought and sold on the same trading day. Day traders take advantage of the small price movement in stock prices. They usually use a large capital for this. This can result to a sizeable amount of gains. Some stocks are good for day trading while some are hard to play with.
Important factors in considering stock choices are volatility and liquidity. Volatility means the range the stock price could cover in a day. This means that greater volatility can get you more profit or loss since prices could really fluctuate. Liquidity means how good the price is when you buy and sell it. Day trading stocks has the potential for significant profit as well as significant losses. And these profits or losses can be incurred in a single trading day. Taking this into consideration, one might say that day trading is a form of gambling.
There are different forms of day trading strategies that traders use to make profits. These strategies differ in the approach by which the trader takes advantage of price movements. Some day trading strategies are:
• Scalping – originally named spread trading, scalping is the immediate selling of stocks once it is deemed profitable. This can involve many buying and selling of stocks in a given trading day. Small price increase can translate to huge profits if a considerable amount of investment is done.
• Fading – this strategy of day trading involves the shorting of stocks when it is moving upward. This is a contrarian technique that means trading against a prevailing trend. Usually considered as a high risk strategy, it involves a lot of skill and finesse.
• Trend following – this strategy simply follows the current trend in stock prices. This strategy of day trading relies on the belief that much longer trend tends to mirror daily movements.
• Range trading – is also known as the antithesis of trend following. This follows the notion that prices tend to move in a range rather than trends. This results to buying when prices are near the lower range and selling when it is near the higher range.
There are certainly other types of strategies as some are developed to suit market environments and stock patterns.
It is good to note that day trading online has been steadily rising. This allows more people to take part in stock market trading without the hassle of contacting a broker. There are also day trading softwares available that can aid in tracking and monitoring vital data to make decisions as informed as possible.
Ultimately, the best weapon in day trading will always be education. Being a high risk type of trading, it can spell disaster for the unacquainted. There are several day trading schools online. One can access information and day trading tips that can prove helpful when it matters the most. As was repeatedly stressed, day trading offers great profit and therefore also can offer great loss. One, though, need not be discouraged from day trading as, just like any other financial adventure, risks equates gains.
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