Day trading is a style wherein traders either sell all long positions are sold or cover short positions at the end of the trading day. There are many markets for day trading and some of these are currency, stocks, futures and commodities. For simplicity, we associate trading with purchasing a commodity, bringing it home or to our business premises, and then selling it.
Some Facts You Should Know About Day Trading:
1. In day trading, different shares are bound to undergo different resistance and support levels. 2. Day trading systems utilize objective and mechanical criteria to choose the different trades of the market. 3. The day trading signals are the signals acquired when stocks bounce off of support levels or sometimes even off resistance, if required. 4. The stronger faith there is in the trend line, the better it acts as a support for you. 5. Day trading stock picks are selected based on a set of strategies or methodologies, of which the most important are technical analysis, trend analysis, relative strength ranking, fractals and volumes, chart formations, and algorithms.
Some Benefits Of Day Trading:
1. The main advantage of day trading is that one's stock positions are not held beyond the current trading day. 2. Another benefits of day trading is that since the positions are closed at the end of the trading day, any sudden news of events doesn't affect the opening prices of trading. 3. One of the benefits of day trading is that since the positions are closed at the end of the trading day, any sudden news of events doesn't affect the opening prices of trading. 4. It is a safer way for people who do not have a lot of know-how in stock trading; therefore, they can easily follow their stocks during the day and sell them off as soon as they see a rise in the value.
Some Tips For Day Trading:
1. Follow the day trading system rules and standards by remembering the number of open positions. 2. If you plan to invest your money in day trading, see to it you do not put in all your hard earned savings in one go, as this might prove to be quite dangerous for you. 3. According to the day trading system, it is a necessity to always be aware of the share movement and to not make wild decisions based on a margin call from a broker. 4. Do not trust advertising claims that promise fast and guaranteed profits from day trading. 5. You have to work with an experienced day trader, need to learn latest techniques, use latest stock market investment software, subscribe to on-line day trading tutorial and need to devise your own trading plan.
Trading Software:
A number of traders and investors rely too much on software's used for these purposes, but you do not get a true picture of the market just by using these software's, as there are many factors which constitute a stock market and some of them can only be assessed through skills and experience. Trading softwares are not only important but necessary to survive in today's competitive market.
1)Many companies offer ?daily rolling products? eg the FinancialSpreads.com FTSE Rolling Daily. Traditional daily spread bets would be closed out at the end of the day. However spread betting companies are always coming up with new products and variations. Daily Rolling Bets are now one of the most popular markets and are replacing the previously popular quarterly futures trades. In short, with daily rolling bets you benefit from the tight spreads and you can automatically roll your bet over to the next day without having to close and re-open the trade.
a.If you are a buyer there will be a small overnight charge b.If you are a seller the spread betting company will even pay you a small overnight fee
2)If you do decide to trade over short periods of time then you may be better off spread betting than share trading. With equities you have to pay Stamp Duty which is not applicable to spread bets*. With Stamp Duty currently at 0.5% in the UK and 1% in Ireland that soon adds up over a large number of trades
3)Volatile markets. The FTSE 100, gold market, crude oil market etc are all volatile at the moment and you do need to make sure you place the correct trade. However with so many rapidly moving markets you do not need to worry about the width of the spread as much. Gold has traded a range of $100 over the last two months. The FTSE 100 is swinging 50-100 points on a daily basis. Crude Oil is currently trading a $9 dollar range. On a given day it can quite easily have a $2, $3 or even $5 range. So if the width of the crude oil spread is 5 cents with and the market is moving 200 / 300+ cents in a single day then it is unlikely you will get caught out by the spread
4)Unlike 5 years ago there is now a lot of competition amongst the spread betting companies and that has led to narrower spreads, particularly on the daily spot markets and daily rolling markets. Many companies offer a 1 or 2 point spread on their daily FTSE 100 markets
5)Spread betting on daily markets is tax free. Whether you day trade and/or trade quarterly futures spread betting is still tax free*
6)Day trading can be a negative for those who cannot sit in front of the markets all day but it can benefit those who are free one or more days a week. So you work part-time or perhaps you are retired or work weekends and therefore are free during the week when the markets are open? Of course that may mean you have less funds to trade so you do need to be extra careful. And of course trading still needs effort and discipline not just the time. But if you are motivated and have the time then it can be a useful extra form of tax free income
7)There is already a large and established market for day trading shares but it is not as easy to gain exposure to markets like Gold and Crude Oil or indices like the Dow Jones, FTSE 100 or Nikkei 255. With companies like you can easily and quickly gain exposure to these markets and trade many other Indices, Forex and Commodities markets. Naturally the US and Asian markets have different opening hours and note that the American markets do not all open at the same time, they have a staggered start
There are a number of pros and cons to this form of trading. Quick, tax free profits are always very tempting however make sure you understand the downside of each spread bet before you trade.
Spread betting carries a high level of risk to your funds. You can lose more than you initially invest. It may not suit all investors. Only speculate with funds that you can afford to lose. Ensure you understand the risks and seek independent financial advice if and when necessary.
* Tax law can change and/or may be different if you pay tax in a jurisdiction outside the UK.
Both Bercle George & Daniel Jones are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
Daniel Jones has sinced written about articles on various topics from Investments, Day Trading and Investments. Situated in the centre of London's financial district the author is a well known commentator for some of the leading financial