Inside
the Day Trading Revolution
Free Info on our recommended Medical Transcription Program leading to an exciting home based medical transcription career
How Does Day Trading Work?
The goal of a Day Trader is to realize
a modest profit on a security in the shortest span of time
possible. This frees up the Day Trader's capital base to be
used again and again in the course of a single trading session.
During a typical day, a trader may complete dozens of different
transactions. Most of these bets will be placed on a handful
of stocks selected for their price volatililty. High Tech
stocks with broad average trading ranges are favorite targets.
Frequently, a trader will execute numerous transactions per
day on a single active stock in an attempt to squeeze profits
out of small price fluctuations.
Day Traders spend most of their
time analyzing trends and assimilating information from a
variety of sources. Internet resources top the list. Up to
the minute charts and graphs depicting volumes and price movements
are keys to successful decision making. Traditional information
resources such as newspapers, magazines, and Cable and TV
business and investment commentaries are also important. Day
Traders also rely heavily on chat sessions and other interaction
with fellow Day Trading professionals for insights and advice.
While Day Traders tend to be an independent bunch, they seem
to appreciate the comraderie and perspectives of fellow Day
Traders.
Because Day Traders rely on price
volatility to eek out narrow gains (typically between 1/16
- 1/4 point per transaction), they live in a universe dominated
by a handful of stocks that are known for their price volatility.
Most active Day Traders will be intensely fixated on this
small group of volatile stocks throughout the trading day
- watching for short windows of opportunity to profit from
modest price swings.
To the Day Trader, it doesn't matter
whether the stock is moving up or down. The important thing
is that there is price movement. An astute and experienced
trader can make money either way. Throughout the course of
a typical pulse-pounding day, a trader will move in and out
of dozens of stock positions in an attempt to wring a small
but steady stream of profits from these relatively miniscule
price movements.
By committing to short term positions,
Day Traders are often forced to liquidate stock holdings at
a loss when the price of the stock moves contrary to their
expectations. If the Day Trader is holding a leveraged position
in a security, the gains or losses will be magnified dramatically.
Professional Day Traders typically
affiliate themselves with one of the growing number of firms
that cater to the needs of full-time Day Traders. In exchange
for commissions and fees, these Day Trading outlets provide
high speed computers and complete access to professional trading
systems and brokerage services. Real time stock quotes and
instantaneous trading capabilities, which are the life blood
of the Day Trader, are available on a continuous basis throughout
the trading day.
The daily commissions and transaction
fees can add up very quickly given the high number of trades
that are typically executed in each session by active Day
Traders. These commissions can easily approach or exceed $1,000
per day! The thing to remember about commissions is that they
are paid out on every transaction regardless of whether a
trade results in a gain or a loss. Commissions serve to minimize
gains and compound losses. The commission structure of the
brokerage firm selected by the Day Trader will be a significant
factor in his ability to generate profits through Day Trading.
What
is Driving the Recent Popularity of Day Trading?
Free Info on our recommended Medical Transcription Program leading to an exciting home based medical transcription career
|