So You Want to be a Day Trader?

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Any trader who would like to take up Day trading seriously on the stock market must learn a few vital basics first.

Day Trading involves the speedy buying and selling of stocks on a day-to-day basis.This system is necessary if the trader wants to secure quick profits.

This profit is achieved by the constant changes in stock values which occur from minute to minute during a typical trading day. It is not often that a day trader will remain in a trade overnight until the next trading day.

Therefore the majority of the trades that are made are entered and exited in a matter of minutes or a couple of hours, but never longer than a trading day.

One of the very first questions that most traders ask when they first start day trading is whether it is essential to sit in front of a computer following the markets ALL day long in order to be a profitable day trader?' I am very pleased to tell you that the answer is NO!

There are a number of other factors to think about, but broadly speaking the main rule of day trading is to trade when everyone else is trading and that is predominately to trade in the morning.Trading after lunch particularly near the close of trading could lead you to being unable to sell your stock off at a profit.

Day trading can be risky - as a matter of fact it's one of the most riskiest types of trading out there. This is because stock prices rise or fall according to the behaviour of the market, which is as you well know is totally unpredictable.

So to put things into a nutshell a Day traders goal is buy and sell shares very quickly in the hope of gaining quick profits within the short time frame that they own those particular stocks. Of course this sounds very simple to do in theory, but in reality it is a lot harder to do in practice.

One factor also to be aware of is that if you are constricted due to a lack of capital, therefore you may not be able to buy large amounts of a stock as you would like to. With a smaller parcel of shares this will limit the amount of profit you can make.

Don't forget that you also have to take into account your entry and exit brokerage before you can start counting your profits..

Remember that it is impossible to predict with any certainty which stocks will result in profits and which will result in in losses. All traders must learn to accept both outcomes whichever they may be..

Another good point to remember is that in day trading, it is the number of shares that is bought rather than the value of shares that should be the main focus. If you decide to day trade, you are guaranteed to make losses, but even with the higher priced stocks the loss should be marginal, because share prices do not ordinarily fluctuate to such an extreme degree over the course of just one trading day.

There are exceptions to this for instance when the stock market is undergoing a large correction. Then it would not make good trading sense to be in the market at all unless you were shorting.

In the market you will find a large variety of different types stocks and shares. Here are a few examples :-

Growth-Buying Shares - These are the type of shares that are made from profit, usually these shares continue to grow upwards in value. But eventually these shares will begin to decline in price, and an experienced trader can usually predict the future of this type of share.

Small Caps - These are my favorite type of shares. Often these stocks are on the rise and show no real signs of stopping. Because these shares are generally very cheap you can get a lot more stock for your money, but they are still a very risky investment for day traders as small movements can mean big profits but on the other side of the coin can mean big losses.

So if you are risk conscious you might be safer to go with large caps and/or mid-caps, which are much more secure and stable and not so volatile as some of the small caps.

Unloved Stocks - This type of stock is usually one that has not performed well in the past. Quite a few Traders buy these shares in the hopes of generating profits if and when the stock rises in value. As with small caps, unloved stocks can be a very risky choice for day traders it might be wiser to look else where..

Of course the examples above are not the only options available when it comes to day trading stocks. One of the best ways to determine which type of stock is right for day trading is to spend some time in some careful research. Plus acquiring a good working knowledge of market patterns, a solid trading strategy and last but not least a disciplined trading plan.

The ultimate key to successful day trading is to be fully prepared. You must get to know as much as possible about the stock before you begin actually trading. But most importantly you need to learn to trade only when the market has given you the right signals to enter, and then only when the volume of activity in the market will support a successful opportunity which will lead you to profits..

I wish you every success in your foray into day trading.

Chris Strudwick is a successful share trader on the Australian Stock Market. For more info please visit my blog at www.asxnewbie.com.

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