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Exploring the world of day trading
By Michael Sanford
Are you looking into a career in day trading? In the past,
the tools for day trading were available only to
professionals. But thanks to the power of the Internet,
everything you need to get started is now conveniently
online. If you have a nose for business, guts and a sharp
instinct for how the market shifts, the maybe day trading
is the job for you.
What is day trading? Basically it is daily, online stock
trading with very short investment. The individuals who
do this day in and day out are called traders, not
investors in the traditional sense. A day trader is
someone who will buy a stock that has high volume and
liquidity and will sell that same stock within a few minutes
up to a few hours.
Day trading happens only during the day. Those who do
day trading usually stay glued in front of the computer
and monitoring which stocks have a fast turnover. During
the day trading, they quickly buy a large number of
stocks at a time and sell it once they see the stock gain
within the day. Day traders will make a purchase of a
stock, hold it for only minutes watching constantly for the
stock to go up or down, selling if it goes down only two
or three cents and holding if it goes up to about five or
six cents and selling. The stock is almost never held over
night as there are many other opportunities and a stock
that takes hours to move is not worth holding.
Day trading can be a very high paced and stressful
lifestyle. There are millions of day traders across North
America but it can be a very fast way to lose everything.
Some people are making over $5000.00 a day but it
takes months and sometimes years to learn and master
day trading.
The broader meaning of the term day trading includes
those who trade daily from their homes or offices,
through Internet brokerages. These day traders might
buy and sell stocks in minutes, but might also hold some
overnight or longer. The latest buzzword for this is "swing trader," those who keep a stock within in a few days before finally selling them. To some, particularly the so-called bandits, day trading is just a numbers game. They do little research and just watch for moving stocks with good spreads. Others are more scientific about it, relying on news and technical analysis to catch everyday price fluctuations.
Day trading requires a certain amount of capital. Generally, day trading should have enough trading capital to buy at least 1000 shares of any given stock on any particular day. There are very few stocks priced under $20 that have the degree of liquidity necessary to make them suitable for day trading. This means that a novice day trader should normally have day trading capital of at least $20,000 to start. In addition, the new day trader should treat this as 100% risk capital and should not have to unduly worry that the whole amount of this capital may be lost very quickly.
You must also be aware that not all stocks are suitable for day trading. Day trading should never trade unlisted or thinly traded (low volume) stocks. These stocks have poor liquidity and hence a higher price volatility. This may make it hard for you to exit your day trading position quickly at a fair price. Trade only high volume, well-known stocks.
About the Author
Michael Sanford has a wealth of trading knowledge available at http://www.everything-trading.com
Article Source: http://www.simplysearch4it.com/article/6512.html
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