Not so long ago, trading stocks was exclusive to brokers and people working for large banks and financial institutions. With the rise of the digital era, buying and selling stocks is open to anyone with an internet connection.
However, it is not as easy to start trading just by opening an online brokerage account and hitting the buy or sell button. Day trading is one of those categories in the investing world where you need experience, a plan, and a whole lot of discipline. Here is a quick look.
A Quick Glance at Day Trading
Day trading is the process of buying and selling stocks in a short amount of time, usually the same day. Most day, traders buy and sell individual stocks or foreign currencies. The majority of successful day traders have plenty of working capital and are highly educated. Most of them use short-term strategies they have honed over the years.
Daily Price Movements
Day traders make money when the price of equity rises or falls in a single day. Sometimes, day traders make money on small price movements by moving in and out of stocks quickly. However, the stocks or currencies they buy or sell are highly liquid and can withstand sharp price movements. Additionally, most successful day traders have access to some of the most advanced trading software available.
Although many financial professionals avoid day trading, many successful traders stand firm that healthy profits are available. However, day trading is complex, and it is recommended that novice investors avoid it until they have gained valuable trading experience. Investors must have an in-depth understanding of how markets fluctuate and what causes sudden shifts in prices.
Most importantly, day traders must have discipline. The key to successful day trading is not to let emotions get in the way. Novice investors who have very little working capital to start may lose significant amounts of money because of their inability to keep emotions out of their trades. The bottom line is many new investors cannot afford to lose what little capital they have. Therefore, it is almost impossible to keep emotion out of sudden price swings.
Anyone who wants to start day trading must have a strategy. If a new trader does not understand terms like arbitrage, margin calls, or swing trading, they should reevaluate their decision to start day trading until they can gain as much experience as the markets will allow.
Originally posted on RagingBull.info.