investing

What is Day Trading?

Making money in the stock market is always the dream. Investors looking to make a big splash and live off the proceeds. Day trading can be that splash, but only if you are disciplined enough and cautious enough to learn the strategies first and foremost.

The first thing to know about day trading is this: Day trading is risky. It is an exciting, risky way to make a living. And it is possible to make money as a day trader. It is true that there are studies that show how day trading results in 90% of traders losing money. That may be the case, but that leaves a 10% chunk of people that are able to profit from day trading.

What is day trading? Quite simply, it is the trading of stocks on a daily basis, searching out the market each day for hot stocks that are ready to spike in value. That spike, when timed correctly, can provide a 20% or 30% or 40% profit, giving a trader a nice little bump. Add those up, day after day, week after week and you can see the start of steady income.

Of course, there are day traders out there that are in it for the wild swings and can muster up the courage to go for broke more often than not. But they need to have a nice stake to work from. When you are day trading, having a low overhead and a healthy savings to draw from is essential, especially if you have an appetite for risk. But day trading, done carefully and intelligently, can be a source of a real income. You can replace your boring cubicle job with day trading if you take the time to learn how to do it and practice before you get too serious.

Day traders, as a group, range widley. The popular culture conventional wisdom might peg day traders as a group of unshaven 20-something males, with a penchant for online poker and a hunger for quick profits. But many day traders are well-educated financial professionals that use short-term strategies to exploit and profit from hiccups in the daily markets. Very often, they are using leveraged funds, which raises their risk significantly. They are also targeting highly liquid stocks or currencies. Because the liquidity of the commodity is vital in day trading. If you cannot unload your stock quickly, you might get stuck in a price free fall.

Managing risk is very key to day trading. You need to be able to see trades in terms of potential wins and losses. Making sure that you maximize your wins and minimize your losses is key to being a profitable day trader. You are going to lose on trades. It is inevitable. There is not getting around that. So being able to keep the amount of the losses contained is the best first step. Limiting large losses is easier and more lucrative than chasing huge gains. That is the secret sauce of risk management.

For many day traders, the first one or two hours after the market opens is an ideal time to be active. That is when the market is churning along at its most volatile level. And day trading is all about the search for volatility. There is nothing better than being able to find hot stocks in the morning that are about to make big moves. That is the sweet spot. Later in the day is ideal as well, after the market has been through all its gyrations and investors are looking to make moves at the end of the day in order to help stave off any bad trades they made that day,

For more information on the differences between investing and trading, look to this resource for picking the right platform that will match your risk appetite and strategy.

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