Day Trading
Day trading is an investment strategy that has been gaining popularity amongst online investors. The concept of day trading has to do with buying and selling company shares before the market closes at the end of the day. For example, the contract for difference (CFD) market on the Australian Securities Exchange (ASX) is open between 10am and 4pm (AEST). Day trading on CFDs, then, would mean that investors open a position after 10am and close the position before 4pm. Day trading is often done through the Internet because prices are shown in real-time and transactions can be opened or closed almost instantaneously.
Day traders are individuals who practice day trading. Since day trading requires significant experience and knowledge of the stock market and the economy in general, most day traders are from institutional investors such as banks. Technological advancements and the spread of online brokers, however, have made it easier for casual traders to delve into day trading. There are many kinds of securities that can be day-traded. Amongst these are stocks, CFDs, options and futures contracts. Day trading can be both risky and profitable for even the most experienced investor. Because of this, it is important for investors to be experienced and knowledgeable of the stock market, market principles and trading strategies.
Day trading works in different ways depending on the objectives and strategies employed by the investor. As the name implies, positions that are opened are normally closed within the same day. Day traders usually open positions at the beginning of the day and wait until the right time to close the position. The close out can happen within several minutes, or traders may have to wait until trading hours are nearly over. Day trading requires astute attention to daily market activity and stock price movements.
There are three strategies used in day trading. First is trend trades. Trend trading means trading in the same direction of the market. This is when investors buy shares as prices are rising. The second strategy applied to day trading is counter-trend trades. These are the opposite of the first strategy. An example of day trading with this strategy would be selling shares as the price rises. The third strategy is ranging trades. Usually used during sideways market movement, this is when trades are executed on prices that go back and forth.
Day trading can be beneficial to investors who know what they are getting into. Since most of day trading is done through the Internet, this has become a well-supported means of trading stocks and securities. Internet sites that provide platforms for day trading often give users access to numerous market analysis tools and services. This gives day traders control, comfort and flexibility while day trading.