Day Trading Overview

2019/04/13

Trading as we all know is the process of buying and selling of financial instruments like stocks, currencies, futures and options. Day trading differs from normal trading in the sense that positions are rarely held overnight or when the market comes to a close.

In the earlier days, the facility of day trading was available only to major financial institutions and banks because of their access to markets and all the relevant market data. The development of technology and the rapid penetration of the Internet has made day trading possible for individual traders, who have the same sort of access to markets that the institutions had earlier.

Traders who use this investment opportunities, capitalize on the difference in prices of the instrument during the course of trading. In short term trading, positions are held only for a few minutes whereas in position trading , stocks are held through out the day. Day trading systems offer a lot of flexibility to its traders and can open positions ranging from a couple of minutes to a few hours.

Some of the types of day trading are trends trading when the traders buy in a rising market, counter trend trading when the trader sells in a rising market and ranging trades when the trades go back and forth in a market that is moving sideways.Depending on the trends of the markets the day traders uses various styles of trading to book profits.

Day trading is not limited to stock market alone. Currencies and commodities are also used for day trading purpose. Because they have access to all the exchanges and market trends at the press of a button, faster trade executions are available at low costs.

Fear and greed are the two pitfalls that has brought many day traders down to their knees. Day trading is a demanding task because you need higher levels of alertness to be able to keep a eye on even slight price fluctuations. Traders who shun taking risks because of the fear factor, lose huge opportunities to make a killing. While it is a rational feeling, in day trading it is an accepted fact that without taking risks you cannot reach anywhere.

Greed is another factor , an emotion that is quite opposite to that of fear, which can sometimes be the bane of a day trader. A day trader must be able to exit a position, once the decided objective is realized. Holding onto a rising instrument because it is rising is a typical greed reaction. It is the main cause of downfall of many day traders.

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