Day trading is the act of either buying or selling a financial instrument over the course of one day. In contrast to long-term trading, day trading can result in a monetary contract being bought or sold multiple times during a trading day. A financial instrument is something trading speculates over and can come in cash, a share in a company and even debt. Good and experienced day traders take advantage of the shifts in speculation of these financial instruments, profiting from the small changes that occur during the day. Such a game can be risky without knowing how to measure speculation; however, it can be equally lucrative if a trader knows how to apply the right strategies.
Becoming a Successful Day Trader
Day trading is based upon the speculation of various financial investments; therefore, many skills are required to turn speculation into success. Firstly a good trader must learn to be disciplined and patient with their investments. It could be assumed that a day trader may not need to be as observant as a long-term financial trader, but this is not the case. A good day trader will need to be organized with the financial instruments they have chosen to speculate over. The price of stocks or shares can change considerably over 24-hours, so observance is a crucial skill. Further, as the value of a day trader’s chosen financial instruments changes over the day, they may need to alter what they are keeping their eyes on. Adaptability within the market a day trader is involved in is essential. However, not all financial instruments will bring success. So a day trader must be willing to accept an inevitable degree of failure. Any financial investments that do not turn out well should not discourage a day trader, as there may be one equally successful around the corner.
How Does Day Trading Work?
As discussed, the most significant difference between a long-term trader and a day trader is time. One speculates over financial investment over weeks, sometimes months; the other does this over 24-hours. With such a short time frame to work within, the way day traders make it into a profitable pursuit differs. A financial instrument is not often seen as a product of investment but rather as a tool to either buy or sell quickly, dependent upon its short-term value. Strategies are dependent upon short-term gain. As the value shifts over the course of 24-hours, a day trader must be willing to capitalize on small incremental changes, considering the nature of the trade, as it will not be there tomorrow. The positions, an amount of financial security given to a set of financial instruments, are closed at the end of the trading day. With this in mind, day traders often used specialized software to map the value of their chosen financial instruments. They also use leverage in the form of a margin instead of equity or profit. This is because of the omission of investment in any of the financial instruments.
Benefits and Challenges of Day Trading
Day trading can be very profitable when an individual learns what their financial instruments are and what their best opportunities look like. The top day traders can make up to $150,000 annually. How much you want to start with is entirely your own choice and will determine your profit margin. For example, a trader starting with $1,000 will be less likely to make as much of a profit as a trader starting with $10,000. With this in mind, a day trader has a degree of freedom with the financial instruments they choose to speculate over and with the amount they are willing to place into them. If a day trader feels confident with their strategies, there is nothing to curtail them from this. As well as effectively being your own boss, a day trader does not have to worry about any extraneous pressures, such as deadlines or the maturity of their financial investments. With it being a day-to-day operation, a trader can take respite at the end of the trading hours. Day traders also start with a new page every day. They do not have to worry about the impact of overnight investment from other international markets. A trader working within the confined hours of the day can capitalize on the speculations in front of them. Making a success of day trading is not without its unique challenges, and it is not a risk-averse practice. Anyone interested in day trading must learn about the strategies they can apply to make the most of their financial instruments. This could require significant knowledge concerning the area they are trading within. Day trading can be stressful: when speculations do not turn out as expected, it can be disheartening. However, the better day traders understand that there are other trading opportunities right around the corner. The regulations can also be discouraging as they often change in different markets and different states. One should become aware of the financial regulations they are working under before jumping in with too big of a starting amount. On top of this, day trading is not a restricted practice. Many traders, companies and businesses take advantage of day trading. This means that if you choose to step into the world of day trading, you will be confronted with competition and multiple streams of advice that may not fit with your speculations. First and foremost, a day trader needs proficient Wi-Fi, computer speed and adequate platform software. Day trading can be done in any space. Still, these essentials will give you consistent updates about the speculations of your financial instruments. Three trading brokers to look out for are:
eToro – One of the most advertised and easily accessible trading brokers. Specializes in using all financial incentives towards stocks.
80.2% of retail investor accounts lose money when trading CFDs with this provider.
Fidelity – This platform has excellent order execution and can be downloaded on apple and android devices. TD Ameritrade – This broker can be used on a mobile device, but it is most effective on a desktop.
Once you have these basics set up, you are halfway on your way to becoming a day trader. However, there are still elements to consider if you are to become a successful day trader. At first, trading will be time-consuming. Depending on how much you want to capitalize from trading, you may spend considerable time studying trading. Doing this will allow you to practice what works for you and develop a good risk management strategy. Day traders can start with as little as $100, but this will most likely increase as you become more knowledgeable of the markets you are trading in. One must check the regulations of trading brokers. It is always best to stick to tier-1 regulated brokers as both the platform and client are under the complete supervision of a global financial legislator. Stepping out of these realms may increase the legal risks of your trading activity. Further, a day trader must understand their strengths and limitations. Those beginning with day trading may want to optimize trading brokers with good customer support, simple analysis tools and low commission fees. However, suppose you are not new to day trading. In that case, a platform that deals with higher fees and more complex financial margin practices may be better suited to your needs. Another consideration for choosing a broker is the volume of educational material accessible through that platform. Some trading platforms, such as those mentioned above, are transparent and include tools to help those unfamiliar with trading.
Where to Learn Day Trading
The material concerning day trading is ubiquitous and varied, meaning it can be overwhelming to beginners looking for simple trading guides. We understand these concerns and have included our own breakdown of some of the best materials available in a dedicated article. Go and read our article on the the 15 best day trading courses for all the information you will need. Understanding this guide and what each of the courses offers can give you a significant advantage before entering into trading. Each educational resource offers a distinct specialty. For example, The Asia Forex Mentor is a comprehensive resource targeted at beginners. In contrast, the Investors Underground is much more suited for traders already experienced and offers the opportunity to communicate strategies with other traders. Outside of our recommendations, there are numerous ways to educate yourself about day trading and its potential success. Brokers, such as eToro, offer introductory courses for those starting. 80.2% of retail investor accounts lose money when trading CFDs with this provider. Suppose you need a break from internet resources. There are some great books on day trading, including The Complete TurtleTrader by Michael Covel and How to Day Trade for a Living: A Beginner’s Guide to Trading Tools and Tactics, Money Management, Discipline and Trading Psychology by Andrew Aziz. These resources, including our recommendations, will give you an excellent platform for taking on the challenges of day trading.
Final Thoughts
Whether you are new to the idea of trading or experienced with the other forms of trading, the day trader can be a very successful pursuit. The challenges are at first tough and should not be understated. However, with our guides and the knowledge of other day traders, there is no reason why you cannot make day trading part of your financial income. Learning day trading, practicing it on the brokering platforms, and even talking about it can become immersive. Even if you are more conservative with the number of funds, you would like to initially, it is still a fun activity. Trading, particularly day trading, is becoming more inviting for individuals who have not experienced anything of its nature before. This could be your new financial opportunity and hobby. WikiJob does not provide tax, investment, or financial services and advice. The information is being presented without consideration of the investment objectives, risk tolerance, or financial circumstances of any specific investor and might not be suitable for all investors. Past performance is not indicative of future results. Investing involves risk including the possible loss of principal.
