Day Trading Guide – Chapter 2: An overview of day trading

The majority of day traders trade on the NASDAQ market as the stock here is cheaper than those on the AMEX or NYSE. However, there are also added risks when one deals with these stocks. These stocks can easily move in either direction within a split second. Depending on the personality of the day trader, some may trade without any particular interest in the company stock but rather in the price fluctuations. Others may research intensively the company background, conduct technical analysis and study the charts then decide to buy or sell based on their observations.

In the same way as there are many kinds of market for a trader to trade in, there are also many kinds of trades which a trader can embark on. For instance, a trader who pays close observations to the trend of the stock in relation to its price movements is engaged in “trend trades”. For those who trade based on the market conditions for any specific day, particularly when it is fluctuating are engaging in “ranging trades”. Those who are involved in “counter trades” are interested in trends opposite to the market movements. Furthermore, some day traders may be more interested in quantitative trades as opposed to qualitative trades. As opposed to investors who hold stocks over a period of time, day traders are more interested in the daily fluctuations of a stock.

Day trading is however not for everyone. It is only for those who are able to understand the market, have risk capital and understand their own limitations well. It is important to know how to trade and understand all the risks involved before you can think of considering day trading as a full time career. Nevertheless, there are also risks that are unique to day trading. In fact according to the SEC, the majority of day traders incur losses during their initial month of trading. Therefore, you should only be involved in day trading if you have the risk capital to gamble with.

Taking considerations into all that have been said, you should embark on day trading only when you have accumulated adequate understanding of the market that you are trading in. You must also be fully aware of where you stand financially and only conduct your trades with a reputable brokerage firm. These prerequisites are crucial if a day trader is to make any profit from his daily endeavors.

http://www.fxempire.com/education/how-to/day-trading-guide-chapter-2-an-overview-of-day-trading/