Day trading – Trading is a very popular investment technique. With the power of the internet, it is now possible for the average person to open an account with a broker and start trading. There are two main ways of trading: long term and short term. Short term trades are entered and closed on the same day and this is called intraday or day trading. This basically means trading that is done the same day. Some of these trades last for minutes or hours at a time.The most popular day trading technique is known as scalping. The scalper is an individual who makes dozens or hundreds of trades per day, trying to “scalp” a small profit from each trade by exploiting the bid-ask spread.
Stock market – In order to do this successfully, it is necessary to recognize and understand the current trend. There is always a trend in trading, one just has to to be able to identify it. Once its identified, use it to the full benefit. The best times to trade would be when the market is making a move in a specific direction, either up or down, as confirmed by technical indicators and most importantly price. It is also critical to have a volume indicator to confirm a move in either direction.
There are a number of ways to identify the start of a price move. A very powerful signal is the breakout – when a stock moves out of a range and starts climbing or falling, along with increasing volume. This shows that there is a buying or selling frenzy going on and is the best time to jump in.
The hardest part of day trading is knowing when to exit a trade, whether it is at a loss or a profit. As a result, strict rules need to be set in advance of the trading day so that decisions are taken based on a preset plan rather than emotions. This mechanical way of trading will ensure long term profitability as in the heat of a trading day, decisions based on emotions can lead to huge losses which are unsustainable.
A timeless wisdom in trading applies, which is to cut losses short and let profits run. This is not always easy to do, hence the need for a plan set out before the start of each trading day, to be followed religiously once trading is underway. It is important to trade by facts, not just feelings or greed. What is seen should be the determination of whether to trade or not.
Lastly, among the best intraday trading strategy, is to be sure to start the next day fresh. The previous days’ trades and any activities should not carry over to the next day. Be sure to close any and all positions by the end of the day, each day. Again, it is not good practice to have the positions open when a new days starts. Intraday traders should practice these techniques to ensure a good outcome.
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