What is Trading?
Trading in broader sense is buying and selling of financial instruments. Now the financial instruments can be a stock, currencies, future, options etc. A trader usually make profit from the difference in the buying and selling price.
There are different types of trading styles a trader can chose depending on its personality and computability, but the ultimate aim of all type of trading is to make profit. Based on the duration between buying and selling of the financial instruments trading styles can be categorized into:
1.Day Trading (same day)
2.Short Term Trading (1 day to few weeks)
3.Medium Term Trading and (few weeks to few months)
4.Long Term Trading (few months to year/years)
What is Day Trading?
Day trading is the trading of financial instrument where buying and selling is done on the same day before the market get close, hence got its name Day Trading. Day trading is also known as Intraday trading. Traders who participate in day trading are called day traders or active traders. It is most popular among traders due to high returns. This type of trading involved high risk and a day traders have to make fast decision depending how market is moving and hence not advised for the beginners.
Types of Day Trading?
Depending on individual personality and experience traders do day trading on various areas utilizing different market analysis. Accordingly day trading have been sub-categorized. The most important types of day trading are:
2. Momentum trading
4. Trading the news
6. Pattern Trading and many more.
We hear a number of times that day trading people looses a lot money though they perform better in others. The reason behind may vary from person to person, like fear, greed, emotions,lack of knowledge etc. Therefore it is very important to follow proper rules for better results not only here but in every field of life. Few of the important strategies a day trader must know. They are:
1. Allocate Money: Never put all your money in day trading, secondly never put all in the same sector. Day trading is very attractive due to high returns, but this is also true that it is very easy to loose money here.
2. Good Knowledge: To be a good day trader it is must to have good knowledge about technical and fundamental analysis and the most important is to interpret both into some meaningful information.
3. Demand and supply: Always have a close eye on supply (buyers) and demand (Sellers). The price movement in a stock is based on supply and demand. More supply and less demands indicates price is going to move down and vice versa.
4. Book losses like profits: Don't become greedy to book profit, assuming it will increase, similarly don't wait for the market to turn around to book losses. Play safe and always determine profit and stop objective before entering a trade.
5. Patience and disciple is the key for a successful day trader. Most of the day traders lose money because they lack above mention discipline and play emotionally.
Advantages of Day Trading
1. Zero Risk: Since the position is closed on the same day, news and events related to the stock wont effect the traders.
2. Brokerage: For day trading th brokerage is low compared to delivery trading, however it differ from broker to broker.
3. Short Sell: In day trading a trader can sell financial instrument first and buy later called short sell.
Disadvantages of Day Trading
1. High Stress: Day traders have to be active throughout the day and have to focus on all the related news.
2. Losses: In day trading profits are huge and that's why when market don't favor results in huge losses also.