Day trading is the process of buying and selling stocks throughout the course of a single day. This is done in the hopes that the price of the stocks that are being traded will significantly rise during the course of the day. While the trader can make some fast profits, there is the higher probability of loss of revenue.
There are a number of different financial instruments that are exchanged in the day trading arena other than just stocks. The day trader can also buy and sell currencies, commodities and interest rate futures. These all hold the propensity of gaining significantly over the course of a single day in the exchange markets.
A private individual engaging in this practice has been relatively rare. Although with the internet opening up access to the stock exchange and many different brokerage firms, the private individual has been able to gain access to this market in recent years. No longer is it only investment banks and brokerage firms that can make profits in this arena.
Tips for Successful Day Trading
The one thing that can make or break the level of success that a day trader experiences is patience. While it may be hard waiting for the next trade when one has lost or is losing money, patience is the key that will determine how successful an individual will be. The new and experienced day trader alike will benefit from having a working knowledge of indices and percentages. Percentages offer a good indication of how the stock has done in the past, its trading ratios and how well it will perform in the future.
Another thing that day traders need to keep in mind is both the liquidity and volatility of the stocks that they are trading. The liquidity of a stock is something that allows the investor to not only purchase, but also sell the stock at a decent price. This will allow for profits than losses.
The Volatility of a stock is when a day trader determines what the daily price range of a stock is. This will measure both the ups and downs of the stock and the price trends that it has experienced in the past and forecasting these trends to the future. It can be the deal breaker when talking about profits and losses.
Day trading can be quite risky. The individual should be sure that the money they are seeking to invest will not bankrupt them if they lose it. Making sure that the individual day trader is up on what makes a particular stock a good investment and then being patient when actually trading the stock will be the main keys in the game of loss and profits.