Trading has evolved and grown into a complicated profit-making investment it is today. Beginning traders may ask, “What is day trading”, “How do day trading rules apply”, and “What are some effective day trading strategies?” Let us shed some light about day trading as a market technique and give day trading tips to traders beginning to try their trading luck.
Day trading is a long-existing trading strategy meant for traders to capitalize on insignificant market movements by opening and closing position during the entire day of trading. This means that traders using this strategy do not hold their trade positions overnight. Instead, traders close their positions every end of day trade and reopen trade positions on the next day trading resumes.
Along with the day trading technique, traders use a number of technical tools and economic calendars to keep themselves abreast with the latest market updates.
Benefits and Risks of Day Trading
Day traders’ primary goal is to speculate the future price movements based on news and financial developments. Before traders seek to know how to make money in day trading, they need to understand the advantages and the risks day trading entails.
Day trading has become increasingly popular these days thanks to the technological development that catered to retail traders who are up to day trading. In turn, profits (as well as losses, inevitably) also were elevated to give chance for traders to profit from day trading.
On the contrary, day trading also has setbacks. For one, this trading approach is not for part-time traders as day trading requires traders to react immediately to every price fluctuation. Another disadvantage is that traders can be limited by the costs of transactions.
Day Trading Exposed
Most popularly practiced in the forex exchange markets, day trading can be a potentially lucrative career for traders. Beginning traders may be looking for readings such as day trading for dummies, or day trading self-help resources to learn day trading easily.
To add to their day trading knowledge, here are some of the most common day trading strategies employed in the markets:
-Scalping – this strategy aims to make several small earnings on small prices changes all trading day long.
-Range trading – this makes use of a technical indicator tool identifying resistance and support levels which will make their buy and sell moves.
-News-based trading – traders capitalize on the recent news that broke out to make use of the volatility of the security involved.
-High-frequency trading (HTF) – this strategy makes use of algorithms to act on small or short-term market inefficiencies.
Aside from being a viable source of profit for investments, day trading has also been plagued with controversy over the past years due to the high volatility. Day traders play a crucial role in the markets by keeping them liquid, balanced, and efficient.