Do you have the tolerance for the risk involved with day trading? Day trading is not a get rich quick business. It is not technically even investing. This competitive game of day trading is speculation at its core and the odds are against you in favor of failure. But for those who crave this type of environment it can be a very exciting and profitable venture. A study in 1999 found that 70% of day traders lost money and of those that made money the profits were made from just one trade.
Day trading involves taking advantage of price movements in stocks within one trading day. Day traders typically hold stocks anywhere from only a few seconds to several hours but they never keep stocks overnight.
It is vital that day traders have access to real time market quotes and activity because fluctuations in price can make or break a day trader if an order is delayed only seconds. In addition to real time quotes (stock quotes and ticker), day trading requires a high speed computer connection and a reliable online order execution service. There are a variety of online trading services. One problem with internet discount brokers is there can be a delay in the length of time it takes them to execute a trade order. The preference of day traders is an Electronic Direct Access Trading service which links the trader directly to the exchange through a modem. This can result in a much faster order.
Tips for beginners of day trading
1. Study the profession in depth before getting started.
2. Practice using a simulated trading system before using real money.
3. Don’t trade with money that you can not afford to lose.
4. Keep in mind, that it takes approximately $100,000 to day trade successfully and see profits.
5. Decide each day how much you are willing to risk and stick to it.
6. Keep detailed records of your trading results to analyze your track records.
Day trading is not something to jump into without considerable thought. Take the time to learn the business, practice without using real money in a stimulated scenario, study as much as you can about it before you begin and most importantly do not risk money you can not afford to lose. Have fun!
About the Author
Jakob Jelling is the founder of http://www.cashbazar.com. Visit his website for the latest on personal finance, debt elimination, budgeting, credit cards and real estate.