Key TAKEAWAYS
Key TAKEAWAYS
The traders who work with larger organizations have few but strong advantages over the ones who are doing day trading alone. They have access to a large amount of financial capital, a trading desk, and expensive software that helps them benefit from the arbitrage opportunities and news events that can make them huge profits before the individual traders can even react to the opportunity.
Individual traders make money by either trading with their own money or manage others. Only a few day traders can access have access to a trading desk and other services; and for that, they have to pay brokerage. With lesser resources, individual traders have to rely on technical analysis and swing trading to take bigger risks with their leverage to compete with larger players of the market.
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Choosing Day trading as a career?
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.
Assessing a Trading desk
Traders working with bigger financial institutions can have access to the trading desk or a few traders managing a large amount of money can access it. The trading desk is crucial in deciding the amount of profit that a trader can make in a day with very little limited risk. Moreover, when there are chances of a sharp movement of prices, traders who have access to the trading desk can execute the orders before the rest of the market which puts them in a dominant position over the traders who can’t access it.
Analytical software
Accessing analytical software is expensive for most of the day traders but traders who decide based on technical analysis and make profits with swing trade need its access than the ones who rely on news to make their transaction in the financial market.
Pattern recognition: When price charts of a financial instrument are analyzed over some time, a pattern can be observed in its graphical representation. The analytical software provides the advantage of reading large data and providing technical indicators like the area of support and resistance, flags, etc. analyzed in the data patterns. This helps traders to make a less risky decision with their leverage.
Neural & genetic applications: With enhanced technologies like AI, it has become possible for designing software that can resemble a human brain and its algorithms. Neural networks in this software help to provide more accurate forecasting of the price movements in near future.
Integration for brokers: Brokers can integrate their trading platforms with the software to access technical information. This makes it easy for them to make better decisions on financial transactions over the platform.
Backtesting: Software keeps a record of every move of a trader on the trading platforms and it looks for repeated patterns. It tracks the strategies that have worked/not worked in the past and can help to make informed decisions on future strategies.
Now, looking at these aspects, it is easy to determine why newbies lose money in day trading. However, these instruments provide an edge to a day trader over the marketplace. After using these instruments, other elements that are responsible for influencing the earnings of a day trader are the capital, invested time, and the market they trade-in.
Multiple News Sources
Important events have a strong influence over the market and thus on the traders’ decisions. Therefore, to capitalize on the news, the traders need to be the first one to know if something of significance occurs. The trading rooms thus have access to constant news coverage of various organizations and special software to analyze the authentic sources of them.
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).
