What is Day Trading?
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Articles » Finance » Stock-Market >> View Article
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What is Day Trading?
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By:
James Ethridge |
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Day trading is defined as the buying and selling of a security within a single
trading day. It is daily, online stock trading with very short investment
timeframes. Those who do this day in and day out are traders, not investors.
Because of the high profits (and losses) that day trading stocks makes
possible, Day trading is often regarded as more like gambling than investing.
In truth day trading is about risk taking not gambling.
Day traders work from their homes or offices. With their eyes glued to
computer screens, a day trader may execute over a hundred trades a day.
But they typically do not hold stocks overnight. In fact, they may
hold stocks for only a few seconds to limit risk.
A day trader will usually sell their positions before the stock market closes
for the trading day to avoid the risk of price gaps between the previous close
and the next open. Some day traders consider this to be a golden rule to be
beyed at all times. Other traders believe they should let the profits run, so
it is acceptable to them to stay with a position even after the stock market
closes for the day.
For example,at 10:00 AM a day trader might buy 1000 shares of stock just as
the price begins to rise, then sell it at 10:04 AM when it is up by 1/2
($0.50). The day trader makes $500, minus commission of about $29.95 or less
per trade, that is a quick $440.00 or so, excluding taxes.
Many day traders focus primarily on the NASDAQ. It is typically more volatile
than the NYSE or AMEX, so it offers more opportunities to play the intraday
price waves and troughs. Volatility however also carries high risk,in the time
it takes to grab a cup of coffee, a stock may move 1/2 point or more.
To some, day trading is just a numbers game. They do little research and just
watch for moving stocks with good spreads. Others are more scientific about
it, relying on news and technical analysis to catch intraday price changes.
Depending on your trading style and strategies, the number of trades made in a
day may vary from one, to dozens or more. Some day traders manage to earn
millions per year solely by day trading stocks.
Day trading has become increasingly popular among casual traders due to
advances in technology, changes in legislation, and the popularity of the
internet. In the past, the tools for day trading stocks were available only to
professionals. But thanks to the power of the Internet, everything you need to
get started is now conveniently available online.
When you are ready to start day trading, you will need to choose a trading
system such as the one I recommend on my website (see Authors Bio).
This course consists of two volumes and two exercise books, which will teach
you everything you need to know, even if you have never traded stocks before
in your life. The new second edition has been completely revised for 2008, and
includes even more detailed examples, refined trading strategies and online
access to a set of in-depth training videos.
Day trading is not a get-rich-quick scheme, it is a mentally and
psychologically challenging activity and is by no means meant for everyone.
About the Author:
James Ethridge,is a freelance writer and successful day trader.For more information on the most highly regarded and effective day trading system available visit
www.info-merchant.com
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