One of the advantages of day trading, or even trading in general, is the perks of earning in the comfort of your home. You can execute trades and earn profits out of it without having to step out of your house and go to work. However, this is not quick, nor is it guaranteed, which is why a trader has to learn the many trading strategies in forex to get to the profits.
What is Day Trading?
Day trading is the process of executing short-term trades; the longest would be within the day. It is called day trading (3. Day trading strategies for beginners) because you must open and close your position within that day’s market hours and before it closes.
The basic idea of day trading is that it allows the trader to bunk up on small profits through time. It is a way of trading that offers quick profits, albeit risky.
Successful day traders’ principle is that they don’t treat it as any sort of hasty trading done on spare time, but rather a full-time job. And this is the difference between these successful day traders and traders who are not.
However, according to a study, only 1% of retail investors who do day trading regularly earn money. This 1% of day traders who consistently earn profits are the same people who treat day trading as a full-time job. It is not the kind of trading you do hastily while you take your meal or when you get a couple of hours off work.
If you want to practice it, you can only learn day trading from the best.
How Day Trading Works
If you are a beginner, you should know that the market is extremely volatile. However, this can sometimes be an advantage because this is exactly where day trading preys on. Day traders chiefly rely on price fluctuations of the particular asset they are trading. They prefer the market to continuously fluctuate throughout the trading day, whatever its cause may be. They also prefer highly liquid stocks as it allows them to easily slip in and out of a position, generally leaving the price unaffected.
Day traders opt to buy if the price of the stock is gearing higher and tend to short-sell if the price is moving lower. In this process, these traders are trying to earn from the stock’s fall. One of the days their day trading tips is to trade the same stock over and over in a day—whether buying it or short-selling it or in a consecutive manner—as long as the stock is moving, it means profit. These traders take advantage of a quick-changing sentiment because this is where they can profit.
Why is Day Trading Hard?
Day trading is hard mainly for two reasons:
- Retail day traders compete with professionals.
Professionals have done forex trading longer and know exactly the right trading tricks and the trading traps to not fall into. These professionals own good trading technology and have personal connections in the trading industry. They have all the capabilities to succeed, but they still often fail. Some of these professionals are high-frequency traders who skim small profits out of each trade. The trading industry is composed of these professionals and other beginning traders—and this is what they want. More inexperienced traders joining in the gamble means more profits to skim.
- Retail investors can get clouded in making decisions.
Some traders get clouded with emotions during trading that they end up losing more than they could afford, or even more than they began with. Some investors buy too early and sell too late, and vice versa. It means that they had their analysis wrong or simply, they expected too much that the market would turn in their favor. These bad trading decisions could be a result of adrenaline, or a combination of emotions clouding the trader—fear, anxiety, and hope. To get past this, you can learn about trading psychology.
How to start day trading
To start, you must assess your determination to succeed. This trading is not for everybody, because it takes a huge amount of commitment and focuses on making it. Aside from that, you also have to assess the amount of money you can afford to lose because risks are a natural part of trading.
One of the day trading tips, or it can be called a day trading rule even, is to open a demo account with a reliable brokerage company before betting your actual money on it. Make sure that you find a good broker, as well.
In line with this, regarding opening a trading account, make sure that you pick one that suits you best. Each broker offers numerous types of trading accounts, with increasing perks at every higher level. Some of these offer personal financial analysts and weekly consultations. As you pick the type of account you want to open, assess first which factors you necessarily need in your trading career.However, if you do find that day trading is not for you, then you can invest in longer-term trading. This is the type of trading where a trader opens a position and holds it for a long period, say weeks or even months. Securities to trade in this type of trading are mostly a diversified stock or portfolio. Since these trades are longer-term compared to day trading, you will still earn, but slower. However, with the right trading tips and strategies, you can still succeed. You can grow your profits over long-term trades. It’s up to you how to play it out.