Key TAKEAWAYS
Key TAKEAWAYS
“Day trading refers to a practice of buying and selling a security within a day. This can be seen at various marketplaces but it can be most often seen at stock markets and foreign exchange (forex).”
How do day traders make money?
The target of day traders is stocks, commodities, options, futures, or currencies; they hold it for a few minutes to hours. Day traders execute the day trading strategies to make profits on the price change of a commodity within a single day.
The buying & selling of a financial instrument within a single day is known as Day trading. Day traders are usually well funded and well-educated. A very important hack is that they work with big leverages and small-term strategies on trading to create capital on small fluctuations of the price that are characteristic of currencies and highly liquid stocks.
Day traders keep themselves updated on the events that can cause short-term fluctuations in the market. Traders always keep a track of scheduled announcements, news, corporate earnings, interest rates, or economic statistics which can create fluctuations in the market if the expectations are not met and allow traders to create capital by making a transaction for financial security.
Scalping: It is a technique that involves making a profit with a little fluctuation in the market. Scalpers generally make 10 to 100 trades within a single day to create capital from their assets.
Range Trading: This strategy of day trading works best when a price moves up and down from its average value calculated in a specified time frame of a few days. The hack is to identify the days when people oversell and overbuys and doing the opposite with your financial security. However, this strategy does not work if the trend is long and can’t be analyzed within a small time frame.
Trading based on the news: News announcements can cause fluctuations in the market; marketers analyze it and make their purchase or selling decision on it.
HFT (High-Frequency Trading): It is a trading method of the new era and employs a computer program to make a transaction for a large number of orders at very high speed, thereby increasing the profits of the traders working manually. This is generally done by bigger financial institutions like banks etc.
Day trading is a field where either a trader works individually or with an organization; the trade is done as a hobby or for a living but what seems common in both is the characteristics that bring them success.
For pursuing any career, some characteristics are prerequisites, and here are some for a successful day trader:
Market’s knowledge & experience: Knowledge is the key. Chart reading and technical analysis are prerequisites and making a transaction without understanding a market can often bring loss. However, only understanding is not sufficient here to ensure your success in day trading; experience is also required. Before working for your hand on day trading, it’s important to understand the in and out of your financial security and its working trend in the market.
Large Capital: If you are looking at day trading as something to make you large sums of money; you need to make sure that you have large capital with you that you can put at risk. Day trader only uses a risk capital which they can lose without getting much affected financially and emotionally. Large capital on small fluctuation can create large profits and minimize losses. However, a little investment can only create little money for you.
Strategy: Creating the right strategy is important to get success in day trading!
Strategies such as swing trading, trading news, arbitrage, and acquisitions are used by day traders. To get an edge over the rest of the market, day traders stick to their own chosen strategies and refine them until they give consistent results with minimum losses.
Discipline: A good and refined strategy can’t help you out if you are not disciplined with what you do. There are instances when day traders lose money just because they fail to meet the criteria set only by them.
To create profits, day traders rely on the volatile nature of the market and highly volatile stocks are lucrative for a trader as they move throughout the day. To earn considerable profits and decreasing the chances of losses, sticking to disciplined trading is vital.
Day trading is indeed a lucrative career but also a challenging one. Before a trader enters in the market, they should be equipped with the knowledge of the trading world and possess risk tolerance ability along with a good amount of capital and a clear goal.
A day trader is someone who capitalizes by carrying out long and short volume trades on the fluctuations in the market price action.
Day trading refers to a practice of buying and selling a security within a day. This can be seen at various marketplaces but it can be most often seen at stock markets and foreign exchange (forex).
