day trading

what is Day Trading?

deltafx writer 4 September 2021

A few decades ago, only people who were working in financial institutions, banks, and brokers could frequently trade in stock markets. However, the advent of the internet changed everything, and online trading centers have developed one after the other. These online centers helped normal people to trade actively in financial markets. Some people started to use these platforms to trade on a daily basis and selected this activity as their full-time job. They are known as day traders.

When you think about day trading, you probably imagine a person in front of a computer with several monitors who is totally focused on the different numbers and charts while holding a cup of coffee in his hand. To be honest, many professional day traders are like this. Day trading is buying and selling various financial assets and aiming to make a profit on the same day. Day trading involves being sharp, taking immediate decisions, and making several trades a day. So, day traders have a hard job, and they need to focus on their job during their working hours. 

This job can be really lucrative for professional traders who are completely aware of every detail in the financial markets. However, the amateurs may face lots of challenges to benefit from this process. You need to be completely ready and have a good plan and specific strategy in your pocket to do this job. Having a good trading plan and sticking to it is very important. Even a professional trader without a plan is vulnerable to losses.

How does day trading work?

Day trading has different types, and each one of them has its own properties that may be suitable for some day traders. Some of them are really short-term, such as scalping, which usually takes about a few minutes. Other types, such as swing and position trading, can last more than a day. Actually, there are times when traders who like position or swing trading hold their positions for more than a day.

The duration in which a trader keeps a position open depends on the status of the position. Sometimes traders hold their positions a few minutes or hours longer to earn more profit. Almost all day trading systems are flexible enough to let traders keep their positions open for their desired period of time. There are several primary day trading markets which include futures, options, stocks, and currencies. By opening an account with a good broker, you can access these markets. DeltaFX is an experienced and prominent broker that enables your direct access to different markets. DeltaFX allows you to engage the markets very fast at reasonable costs.

Day trading methods

Traders usually try to master one method of trade; however, there are some traders who use different methods based on various conditions of the market. The main methods include trend trades, counter-trend trades and ranging trades. Trend trades refer to trades that are made in the current direction of the price movement. For example, a trader starts to buy and an asset when the price is going up. Counter-trend trades refer to the trades which are made against the current direction of the price movement. For example, selling assets when the prices are going up. And finally, the ranging trends refer to the trades made in a specific range of prices and are usually used when the market is moving sideways.

Pros and Cons

Day trading, like any other trading strategy, has its pros and cons. Here we only talk about some of the important points.

  • You can quickly be aware of the result of your trades.
  • Day traders avoid overnight risks when the market movements may be against them.
  • You feel great and motivated when you make several quick, successful trades.
  • Overthinking will not be an option for you since you do not have the time to do that.
  • Day trading requires relatively high amounts of money in the beginning.
  • The profit you make from each trade is usually low.
  • It is very addictive.
  • You are busy most of the time during a trading day.
  • You are always vulnerable to the risk of overtrading to compensate your losses, leading to more losses.

Who should look for day trading?

The traders who like day trading have different approaches. Some of them make numerous trades every day, and many of them may turn out to be bad ones. But others prefer to try to find the right opportunities and make less successful trades. Their goal, which is making a profit, is the same, but they have different approaches. Both groups have enough experience to decide their suitable approaches.

If you are an amateur investor who recently joined the trading world, you should know that day trading is not for you. Every trader must first gain enough information and experience to be able to work as a day trader; Because inexperienced day traders may lose a lot of money in the blink of an eye. This adventure can be riskier when a novice trader borrows the money to work as a day trader.

A good day trader must have enough information about different markets, different assets, technical analysis, reading charts, and always be aware of important economic and political news.

Conclusion

Day trading might be a controversial process these days, but it is an excellent way to make money. The activities that day traders do every day make different markets liquid and efficient. In contrast to all recommendations to new traders to gain more information and experience before entering this field, we see more and more new traders select day trading every day. The development of the internet and online platforms have a significant role in this subject. You can learn everything you need about financial markets on the DeltaFX website. So, take a look at different articles before starting to work as a day trader to maximize your success rate.

Leave a Reply

Your email address will not be published.

Related Articles

Are you ready for trading?