What is Day Trading?

Day trading refers to the practice of buying and selling financial instruments within the same trading day, all positions have to be closed before the market closes. Traders who practice day trading are generally classified as speculators because the process of day trading is a form of speculation of securities. Securities are tradable assets that can be any kind of financial instrument. Day trading is quite different from long-term trading in terms of buying and holding and value investing strategies.

Day trading has caught quite attention in recent days because now anyone can get their hands in day trading due to the internet and ample smart trading platforms. In the pre-internet era, only professional traders, large financial institutions, brokerages, and trading houses were able to practice day trading.

The other reason why day trading has become a dinner table discussion these days because millennials think that it’s a ‘Get quick rich’ scheme. But it’s surely not true, day trading requires a lot of knowledge and skills before entering the market and there are some specific rules and strategies you need to take care of while trading.

And definitely, it has the potential of a lucrative career if you do it correctly. Don’t try to get into more complex things, you just have to do simple things correctly. Apply these simple rules and strategies carefully with a painstaking approach and make day trading a rewarding income source.

eToro, AvaTrade are Some of the most trusted and leading online brokerage firms that offers exceptional trading services and features. They offers a wide range of trading instruments with low commissions and spreads. Traders get an advanced trading platform which can help them trade smoothly into the financial markets. You can open an account with eToro and AvaTrade and trade safely.

So, discussing the best day trading techniques and strategies for beginners.

The Basics

While day trading can be practiced in any marketplace, it is most common in stock markets and foreign exchange commonly known as forex trading. Day traders typically spend their time on precision, news and market fluctuations plus they are well funded. Professional day traders use high amounts of leverage to capitalize on small price movements that may occur in highly liquid stocks and currencies.

A day trader’s role is to go through news before entering into the market for the investment and then trade accordingly. In day trading, one needs to note that the data will either go upwards or downwards depending on the external factors, and a quick decision should be made while investing.

The sweetest stock for a day trader is that which has the highest price movement throughout the day. To profit margin in day trading, you want to heavily rely on volatility in the market. Economic news, investors sentiment, change in leadership of the company, all these factors affect the volatility.

Swing Trading

Swing trading is a form of trading where traders wait for few days to several weeks in order to make profit. Day traders use technical analysis and fundamental analysis to look for potential rewarding trading opportunities, price trends and patterns. Basically, this kind of trading involves holding the position either long or short for more than one trading session, but no longer than a couple of months. It is possible for one trading session but that is a very rare chance because it requires extreme volatile conditions.

Swing trading is the process of capturing a huge chunk of potential price movements. The strategy involves reading multi-day chart patterns that help traders to predict the movements of trade setups during a day. In this technique, day traders use multiple tools like momentum indicators, price range tools.

Arbitrage

Arbitrage involves the process of simultaneously buying and selling the same asset in different markets in order to make benefit from the slightest variation in the asset’s listed price. Arbitrage trades are made in stocks, commodities, and currencies.

Arbitrage is useful when a financial instrument is purchased in one market and simultaneously sold at a higher price in another market. This is the way to make a risk-free profit while day trading. But with advancements in technology, it has become extremely difficult to make a profit through this method that is pricing errors in the market.

Identify Entry and Exit Points

It is not always possible to consistently buying low and selling high in intraday trading, so you require to understand the trend and make the best out of it. Never enter in intraday trading without a stop loss. If you will not do so, you may end up with heavy losses. You must enter stop loss while as part of your buy or sell order.

Don’t forget to follow the trend while intraday. Don’t try to short the market if the trend is going really strong. Be on the right side of the momentum. That’s it!  Entry and exit is all about charts, news and sentiments. Investments should be made quickly as soon as the market news breaks out. If you are ready to make move with the day trading, try not to run the overnight risk.  Day trading capital may not be equipped for the overnight risk as a lot can change in 12 hours.

Resistance and Support Levels

Another important strategy that works in day trading. Resistance level is the level that prevents the price to increase and support level is the level that prevents the price to decrease. Simply draw a line that connects high and low levels. When price climbs towards the resistance, means traders are more inclined to sell and in case of support level, it’s the opposite. You can draw resistance and support by using the Fibonacci retracement tool.

In the opening range of 30 minutes, you can decide by noticing the fluctuation in any stock.

Final Words

Remember that, day trading is not a ‘get quick rich’ scheme, it requires knowledge and skills to run day trading. Day traders typically spend their time on precision, news and market fluctuations and they don’t trade without a stomp loss plus they know well how to use resistance and support levels efficiently. Day traders, play important role in the marketplace by maintaining liquidity, which helps to generate the profit.

Finally, stay cool and try to keep the emotion out of your trades. Try to think strategically always and do not follow the herd, especially in day trading.