Day trading. Tips for Dummies
When our ancestors came up with the money, they wanted to find a means of fair exchange of goods and services between two people or groups of people. Since then, any exchange of goods implies a monetary relationship that gives material expression to the transaction.
Over time, trade has penetrated into areas where the money is not the main driving factor. Trading has become a profitable business and plays a very important role in the economy.
Nowadays there are many types of trade. The type of trade depends on the type of exchange used. For example, Forex or the foreign exchange market is focused on foreign exchange.
Among the many types of trading, day trading has over time made a name for itself in this area. Day trading has gained a good reputation for its unprecedented levels of profitability.
What is day trading?
Day trading is a system of buying and selling financial instruments such as stocks and bonds during the day.
In other words, day trading is a series of material exchanges that take place throughout the day. Thus, in day trading, for every block of shares purchased, there is a corresponding sale. Profit or loss is determined by the discrepancy between the price of goods and the price at the time of the transaction.
The main idea of day trading is that the condition of all transactions is to be carried out during the day to make sure that the current closing price remains unchanged.
Price changes usually occur at night, when the previous closing price changes depending on the results of the day’s activity.
Day trading can seem straightforward and sound financially safe. However, trading experts argue that most people suffer losses in the course of day trading. Statistics show that 90% of day traders spend more money without making a profit in return.
Therefore, it is important that every day trader knows how to act wisely in the market. You need to have a sharp mind and quick wit to avoid losses in day trading.
Here are some tips for newbies:
- Fix bugs quickly
The point is to quickly reclaim what you have lost. Try to take the situation positively and use all conditions constructively. There is no point in crying over a broken trough. What you really need is to cut waste with quick, precise action.
- Go with the flow
In day trading, it is not recommended to swim against the current, not to correspond to the general direction of the market. This means that you should concentrate on the best selling stocks and sell the stock short.
This position is based on the belief that the development of securities will continue to rise in value. Fortunately, this strategy is effective for eight out of ten traders.
- Control your emotions
Some traders tend to be emotionally dependent on their activities in the market.
Day trading can really create a buzz. And emotional people tend to act impulsively. Any good news is perceived by day traders as a signal for positive changes in the market. Therefore, if you are too emotional, you can act before soberly assessing the situation.
In order to avoid problems, it is worth controlling your emotions and analyzing all conditions before taking any action. If you have suffered losses, analyze the situation, and determine where you made a mistake.
Don’t worry too much about failure. Remember that an open mind is very important in overcoming the difficulties that come your way. This will help you succeed in business.
TRAINING TRADING. DAY TRADING AND SWING TRADING. WHAT IS THE DIFFERENCE?
While learning to trade, you can choose the style of work that will meet your individual needs. There are different types of trading: swing trading, chart trading, day trading. Swing trading and day trading have similarities, but they are not the same thing.
If a trader is inexperienced and just starts trading on the stock exchange, without proper training, he risks quickly falling into debt. If we talk about day trading when a trader with insufficient knowledge and experience starts trading using borrowed funds. Day traders tend to trade using margin (borrowed funds), so while it brings them more money and more potential for profits, they can also lose more. A big mistake for most novice traders is that they rush into day trading with insufficient knowledge about the specifics of this type of exchange trading, and this, in essence, is equated with gambling.
Swing trading doesn’t rely as heavily on margin trading (you shouldn’t use it if you don’t want to) as it does with day trading. This is not to say that swing trading is risk-free. There is relatively less chance of losing money if you consider the risk management rules outlined below.
Since day traders change positions at such small intervals (1 minute, 3 minutes, 15 minutes, etc.), they must constantly monitor their trading to make sure they are still in the profit area. This can lead to serious personal stress over time. Many people who are engaged in day trading do it their main job – they trade on the stock exchange intraday, either as part of a corporate institution or on their own. Day trading is a good opportunity to make profits quickly on the day.volatility stock prices. Here you need to be ready to devote all your time to tracking price movements on stock charts and to show special care in trading throughout the day.
Swing trading uses time frames that are much longer (you usually own securities for several days/weeks). You should still make sure that you are in a favorable position, but you have some breathing space. It is entirely possible to profit from swing trading by spending some of your time trading stocks while working somewhere else on a regular basis. This flexibility makes swing trading a great opportunity for people who want to learn to trade profitably without devoting their entire lives to it.
Day traders compete with hedge funds, short-term traders (“high-frequency traders”), and other market professionals who are all about taking advantage of trading on the stock exchange. Therefore, if you are going to compete with these institutions, you need not only good training in trading, but also, most likely, advanced software, trading platform, or other cutting edge technology. But if you are aiming to make money in a short period of time, be prepared to constantly learn and be extremely careful in the stock market.
Swing trading can also be done individually with relatively little money. A standard computer/laptop and traditional trading tools are all you need to start using this type of trading. There are many free sites to do research.
In day trading, you are essentially monitoring your positions every minute. You must be disciplined, determined, and have more than a superficial understanding of the markets. After all, you are about to compete with the corporate finance professionals who make their living from this job.
The general strategy used in swing trading makes it such that even people who do not know anything about finance, learning to trade on the stock exchange, can become successful. Don’t get me wrong, this is not necessarily “easier” and there are undoubtedly pitfalls in trading in general. However, if you are not ready to devote all the time to stock trading, swing trading is usually the best and less risky option.
If you are ready to devote all your time to trading the stock market, day trading is most likely for you. If you want to trade stocks and do something else, swing trading is likely the best option. Whichever style of stock trading you choose, in any case, you need to be well informed, take into account the time and risks, learn from mistakes, and work on yourself.