Trading platforms like MT4 and zero commissions have made it easier than ever for retail investors to try their hand at trading like the experts in recent years. The rise of inexpensive brokerages and online trading, as well as the fast distribution of news throughout the world and extremely low commissions, have levelled the playing field.
Basics of Day Trading
The majority of day traders are well-educated and well-funded. They take advantage of tiny price swings in highly liquid stocks or currencies by using high leverage and short-term trading tactics. The activity of buying and selling a security in a single trading day is known as day trading. Market psychology and expectations influence scheduled releases such as economic statistics, business earnings, and interest rates.
A Day Trader’s Characteristics
Professional day traders, or individuals who trade for a living rather than for fun, are usually well-known in the industry. They usually have a thorough understanding of the market as well. The following are some of the requirements for being a successful day trader.
In-depth market knowledge and experience
Those who attempt to day trade without first learning the fundamentals of the market frequently lose money. Technical analysis and chart reading are both good skills for a day trader to have. Charts, on the other hand, might be deceiving if you don’t have a thorough understanding of the market, you’re in and the unique hazards that present in that market. Do your due diligence and understand the particular ins and outs of the products you trade.
Capital sufficiency
Day traders only invest money they can afford to lose. This not only protects them from financial disaster, but it also helps them trade without emotion. To profit efficiently from intraday market swings, a considerable amount of capital is frequently required. Because most day trading involves a high degree of leverage in margin accounts, and dramatic market movements can trigger large margin calls on short notice, having appropriate funds is critical.
Strategy
A trader requires a competitive advantage over the rest of the market. Swing trading, arbitrage, and trading news are just a few of the methods used by day traders. These tactics are fine-tuned until they consistently provide profits while effectively limiting losses.
Discipline
Day traders rely largely on market volatility to make money. “Plan the trade and trade the plan,” as they say. Without discipline, day traders lose a lot of money. Day traders also like highly liquid equities since they allow them to change their positions without affecting the stock’s price.
Career as a Day Trader
The majority of day traders who make a living do so for large players such as hedge funds and bank and financial institution proprietary trading desks. Individual traders frequently handle or trade with another people’s money. Day trading necessitates access to some of the market’s most complicated financial services and products.
“Must Have Things” – A Day Trader must have!
Analytical Software
Trading software is an expensive necessity for most day traders. Some of these applications even interface directly with the brokerage. Combined, these tools provide traders with an edge over the rest of the marketplace.
– Desktop Based Software
o Metatrader4 – Desktop based software to analyse as well as trading terminal.
– Web Based Application
o Trading View – It is the best in class and most importantly it is “Free” to start!
Several News Sources
The majority of opportunities for day traders come from news, so being the first to know when something noteworthy happens is critical. A typical trading room has access to numerous main newswires, ongoing coverage from news organisations, and software that monitors news sources for important stories.
The Dangers of Day Trading
The Securities and Exchange Commission of the United States has identified some of the hazards associated with day trading. Day traders often lose a lot of money in their first few months of trading, which is why they should only risk money they can afford to lose. Day trading is a full-time career that is both stressful and costly. Day trader techniques earn money by leveraging borrowed funds – which is a risky strategy. The Securities and Exchange Commission of the United States has identified some of the hazards associated with day trading, which are summarised below:
– Prepare to lose a lot of money: Day traders should only risk money they can afford to lose because they often lose a lot of money in their first few months of trading and many never make a profit.
– Day trading is a full-time job that is both demanding and expensive: Day trading is extremely difficult and necessitates a high level of concentration in order to recognise market trends while watching hundreds of ticker quotes and price swings. Day traders also have a lot of expenses because they have to pay commissions, training, and computers to their firms.
– Day traders rely on borrowed funds to make money: Day trading tactics make money by leveraging borrowed funds, which is a dangerous practise.
Conclusion
Day trading is a feasible technique to make money, despite the fact that it has become rather contentious. Day traders, both institutional and individual, are critical to the market’s efficiency and liquidity. While day trading is still popular among beginner traders, it should be reserved for those who have the necessary skills and resources.
