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Day Trading Stocks
Quite simply, day trading stocks is the act of buying and selling a stock within the same day, with the hope of making a profit by leveraging large amounts of capital (money invested) to take advantage of small price movements in highly liquid and volatile stocks. The term Liquid stock means a stock that is characterized by a large volume of trading and a large pool of interested buyers and sellers. Liquidity allows you to enter and exit a stock at a good price with tight spreads, or the difference between the bid and ask price of a stock, and low slippage, or the difference between the expected price of a trade and the actual price a stock trades at. Volatility is a measure of the expected daily price range—the range in which a day trader operates. A higher volatility means that a security's value can potentially be spread out over a larger range of values. This means that the price of the security can change dramatically over a short time period in either direction and therefore the potential of greater profit or loss. A lower volatility means that a security's value does not fluctuate dramatically, but changes in value at a steady pace over a period of time. Many people get into day trading expecting to make large returns every year with minimal effort. In reality, many day traders lose money. However, by using a well-defined strategy that you are comfortable with, you can improve your chances of beating the odds.
It is critically important for a Day Trader to be "in the market" full-time. If you do not pay constant attention to the market, I guarantee that you will miss out on crucial information that will inevitably cost you money. In fact, part-time day trading stocks will likely result in a net loss of capital and leave you further from your goal, than if you didn't trade at all. You are better off using a mid-term trading strategy like breakout stock trading system.
Short term traders have the luxury of turning on the dime. They can bob and weave, switch sides with the speed of light and change stances. To operate as a business, classification as a Day Trader means that you day trade 4 times in a rolling 5 business day period in a margin account. This regulation that governs pattern day trading requires that you have $25,000 to use the buying power in this account. A Margin Account allows you to borrow money from your broker in order to purchase additional securities using your current holdings as collateral. A $2,000 balance must be maintained if you wish to borrow funds on margin.
Day Trading Chart _________________________________________________________________
Lets compare a Daily and a Hourly stock chart of the same stock below.
Daily Chart
Hourly Chart
So the difference being, is that when you use a Day Trading system, the chart patterns will be still be there, but in a much shorter time frame. You trade in and out, quickly, by the hour, sometimes sooner. Can you see why this style of stock trading requires total commitment and focus?
Your knowledge of Technical Analysis, Risk and Money Management and Candlesticks Charts is essential.
Next: Day Trading Systems and Strategies
Recommended Day Trading Stocks Tools and Resources. _______________________________________________________________
Return from "Day Trading Stocks" to "Stock Trading Systems"
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