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What is Day Trading?

Since the advent of the internet, online trading has become a massive activity globally, and with good reason. Online brokers now allow traders to access a myriad of global markets from their computer and/or mobile device, meaning that trading is now more accessible than ever.

This has led to a significant boom in trading as both a hobby and a main source of income (for professionals). Now, day trading is a common activity amongst savvy investors who know how to read and take advantage of the global markets. This guide will explore day trading and what it involves.

Day Trading

Traders who buy and sell securities on the same day are known as day traders, as they are trying to make a short-term profit within daily market trading hours. It is possible to day trade on almost any market, but two of the most traded markets are forex and the stock market.

A professional day trader will typically treat trading as their sole occupation/business, but it can also be a part time occupation or even a hobby. It is also worth noting that day traders can either work for themselves or for larger institutions.

Can Anyone Day Trade?

As long as they have access to the internet, any individual can day trade, as trading is usually conducted through an online broker. Now it is also possible to access the markets through mobile devices, which allows for much greater flexibility in any day trading schedule.

It is worth remembering that trading always carries at least some element of risk, and this risk increases when leverage is applied to investments. As such, day trading should be approached sensibly, with a willingness to analyze how each market behaves differently.

Can You Make Money From Day Trading?

Professional day traders would be out of a job if they didn’t make money from trading on a regular basis, but making a profit is by no means guaranteed. To be successful in this field requires discipline, the ability to research and expert knowledge of global markets and the factors which influence their behavior.

Since day traders must take advantage of market opportunities as and when they open up, a keen eye for detail is needed, as is the ability to understand the optimal times to buy and sell any given asset.

The essentials for day trading success include:

  • A Strategy: No trader can expect to make money without a solid, comprehensive, and considered strategy which is based around their financial goals and the markets they trade. A strategy also ensures that trades are conducted using logic rather than emotion, which is essential for minimizing overall risk.

  • Research: Research is a necessary part of all trading strategies, as without it traders would essentially be gambling on market movements. In the forex market, for example, looking at upcoming political elections can help traders make predictions on how a certain currency may rise or fall in value, thus informing their trades.

  • Trading Tools: Using the tools available through a broker is an essential part of day trading, as they help traders analyze the markets and paint a clearer picture of market behavior (and influence trades accordingly).

The risks involved in the forex market

As there are advantages in trading in the forex market, there are equally as much risk involved. Similar to any type of trading, risk capital should always be utilized for investment. As the forex market is a highly volatile product, loss of capital can be incurred exponentially depending on market conditions. Negative slippage can be incurred during volatile market conditions, which will execute your order with a less favorable entry or exit price. On Sunday’s, market gaps can occur due to economical events around the world, these gaps may cause your account to obtain large losses and/or may leave your account balance in a negative state. Always take into consideration your financial circumstances and your risk appetite prior to establishing a forex trading account.

Successful Day Trading

Different day traders take on different levels of risk with their investments, with some preferring high risk, volatile markets, and others preferring lower risk, steadier markets. The chances of becoming a successful day trader really depend on how effective any given strategy is, and how well risk is managed. It undoubtedly takes time to master the markets, and there will always be losses on the path to success.
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