Trading, business and the financial market is a big, complex world. There’s foreign exchange, currency trading, and even day trading. And perhaps, it is day trading that needs more than just a simple mention in the book, for one, foreign exchange and currency trading are relatively easy to understand, day trading is a whole new concept. Simply put, day trading is the buying and selling of financial investments and securities within the same trading day. These financial investments and securities would include stocks, stock options, currencies, and contracts like equity index futures and commodity futures.
As opposed to swing trading where the stocks are held for a couple more days, the stocks in day trading are held only for the duration of the trading day. Day traders buy and sell securities during the day, and do not hold stocks overnight. Anyone interested in day trading must have enough capital for him/her to be able to buy at least 1000 shares of a particular stock on a particular day. A neophyte in this venture would do well to save around $25,000 for him to be able to play in the market. Furthermore, this should be treated as a 100 percent risk capital. Day traders should know how to cut their losses short. They should know to trade along with the trend, go with the flow, and never to get emotionally attached to their trades. It is advised to trade high volume, popular stocks as they are easier to sell at the end of the trading day.
Day Trading Currencies
As day trading requires a capital of at least &25,000, many might ask what a trader could do with a capital less than $25,000. The solution: trade currencies. A player could day trade currencies with as little as a couple of hundred dollars. All you need to do is open a FOREX mini account. One of the perks of day trading currencies is that the FOREX market is open 24 hours a day. You can day trade even at night, anytime of the day, any day of the week.
There’s no ‘uptick rule’ which makes selling of currencies as easy as buying them. The player can day trade his capital, providing him with chances to cut back on possible losses. The player also has greater leverage. Normally, day traders have an intraday margin of 4 to 1, allowing them to trade $100,000 worth of stock with their $25,000. But day trading currencies or short-term trading has a 50 to 1 margin, which allows the player to trade $1,250,000 with $25,000 or less.
What’s more, the trader has the option of deciding the amount of leverage to use depending on his day trading strategy, his available capital and the risks he’s willing to take. It’s also more liquid because the currencies are always in action. As there are only few currencies to monitor as compared to stocks, currency day trading is easier to follow currencies than stocks. A risky business, one can earn as much as $50,000 in day trading for someone with a keen business sense.
As the market is prone to fluctuations, the day trader must be always alert as to when to decide to sell the stock or hold for the right time. In a snap of the fingers, everything could be lost, or you could also have earned your first million. This isn’t a game of luck. Research, study the market, learn the strategies and remember to make wise decisions.