What is day trading? In simple terms, it is buying and selling assets in one day. In this article we will help you start trading assets as well as improve your day trading strategies.
Why consider day trading?
Day trading is a trading strategy when you make short-term trades within the same day with the goal of making a profit. This means that day traders usually open positions during the day, only to close them in the evening without keeping any overnight. This trading strategy is popular ahead of scheduled financial announcements such as when companies present their earnings and quarterly reports.
Day trading emerged when the internet was new, but as time has passed, the number of day traders has decreased considerably. A major obstacle is the brokerage fee. Even though internet brokers have lowered their prices, it still costs quite a lot for a small trader.
Are you suitable for day trading?
In day trading, it is very important to be able to concentrate. When brokerage firms hire trainees, employers go almost exclusively by the applicant's personality. Skills that are valued are:
- stress tolerance,
- ability to make quick decisions
It is extremely important to see losses as a natural part of the trade. Learning from incurred losses will help a person develop a unique trading strategy.
It is far from optimal to start day trading with the aim of seeing big returns quickly. The returns come from many small gains and losses, but the losses are smaller relative to the gains. Money that you don't lose is just as valuable as money you make.
What are the best markets for day trading?
Day trading is often associated with markets that have fixed closing times, but in fact, a day trader can just as easily trade markets that are open around the clock.
Here are some popular markets for day trading:
Day trading in shares is particularly popular with beginners because there are so many different stocks to trade. In the stock market, it's common to close positions at the end of the day to avoid the risk of the stock price opening significantly higher or lower than the previous day's closing price.
When you trade indices, you are speculating on the performance of an entire group of stocks rather than a single company. Day trading with indices therefore gives you exposure to a larger portion of the stock market.
Cryptocurrency day trading is becoming increasingly common, especially as derivative products allow traders to benefit from both rising and falling market prices. And because the crypto market is open 24 hours a day, day traders don't have to pay to keep their positions open overnight and worry about how the market will move when they're asleep.
The foreign exchange market is another popular choice among new day traders because there are a huge number of currency pairs to choose from, as well as the market being very liquid. As with cryptocurrency, the foreign exchange market can be a way for day traders to avoid paying to roll over positions and be exposed to unexpected market movements during the night.