What is day trading?
It is the practice of selling or buying securities in one trading day. Positions are opened and closed in a single day. This practice is most common in the stock market like NASDAQ: ILAG at https://www.webull.com/quote/nasdaq-ilag and the foreign exchange market. These traders are well-funded and highly educated. It is a short-term practice in which the traders profit from small changes in the price or liquid stocks by using high amounts as leverage. These traders could work alone or for a company. In some places, day trading is seen as a controversial practice but it is profitable and beneficial if done right.
Strategies used
- Scalping: This is a strategy where the traders try to make small profits from the changes in the price throughout the day.
- Range trading: This strategy includes using resistant levels and support to decide whether one should buy or sell.
- News-based trading: Volatile trading opportunities are used in this trading strategy.
- High-frequency trading (HFT): Advanced algorithms are used to take advantage of short-term inefficiencies in the market.
- Breakout: This strategy is used when the price clears the level specified by the trader. A long position is then entered.
- Momentum: The support of high volume is used to act on news sources. This strategy is mostly used by beginners.
What is it like to be a day trader?
Here are some of the characteristics of day traders:
- Knowledge: The trader must have skills like reading charts and technical analysis. Whether you are doing this as a hobby or as a career, you must have some basic knowledge about this field so that you do not lose money.
- Capital: In day trading, people are risking their money everyday so they only use money that they can afford to lose. Doing this helps to save money and not let emotions take control of the trading process.
- Strategy: The trader must try and choose the strategy that is the best for them to use in the long run.
- Discipline: Regardless of what strategy is chosen, the trader is heavily dependent on the volatility in the market. Hence they must be highly disciplined to make a profit of these differences.
What one should know before pursuing it as a career
Besides knowledge and experience, a trader also needs patience and time to spare. People who try to do it as a hobby or part-time job are usually not very successful. If you are only beginning, start small. While trying out different strategies, focus on a few small stocks. Also, keep your emotions out of trading. You must make a plan and to stick to it, you need to follow certain practices of discipline.
Disclaimer: The analysis information is for reference only and does not constitute an investment recommendation.