For those of you who are thinking of entering the exciting world of daily stock trading, here is a little Day Trading 101 to get you up to speed and help minimize the potential pitfalls. It does take knowledge, the ability to react quickly, and a steady nerve when prices do not rise as you anticipate participating in the day trading of stocks.
Day Trading can be a rewarding endeavor for those who are persistent in continuing to learn from mistakes and take advantage of opportunities. However, before we get to the nuts and bolts of Day Trading 101, let’s start by asking a rather obvious question.
What exactly is day trading?
Day Trading is the buying and selling of stocks based on the tiny fluctuations of market prices that occur many times over the course of a single day. A day trader is someone who sits at a computer with a high speed internet connection so they can watch the minute by minute fluctuations of the stock market. This is not to be confused with the overall trend of a particular stock. This is more along the lines of the small fluctuations in price that can occur at any given time.
For example, let’s say over the course of a day, stock “A” drops ten points, but during that time, stock “A” may fluctuate up and down a point or more at a time. Perhaps it starts by dropping three points, rises two, drops four, and rises up five, then falls nine points at the end of the day. A day trader could conceivably buy the stock after it first drops three points, then sell when it rises up two, making a substantial profit depending on the money put up despite the fact that the stock fell afterwards. Of course, a day trader could also have bought the stock after it rose up five points only to see it plummet by nine and lose a considerable amount of money.
How Do I Become a Day Trader?
The next step in Day Trading 101 is setting you up with the right equipment. First, you need is an up to date computer with a high speed internet connection. Next, find a reliable, established trading site that will handle your transactions such at Schwab or ETrade for example. They are well established brands that offer low fees per stock purchase.
The next step in Day Trading 101 is research and lots of it. You will need to understand and internalize the daily fluctuations of the stock market. How they work, what factors or events occur that can cause stocks to bounce up and down in price, etc. You may want to practice on demo programs to help you understand how it all works.
Now you will need some capitol to invest in the stocks you want. Generally speaking, the more money you can invest, the more you can make or lose, so be prepared. Now you will want to pick stocks that have a high trade volume or liquidity with a big difference between their securities and asking price, these are the stocks to select.
And now you are as ready as you’ll ever be. Your education goes well beyond Day Trading 101 as experience will now be your best instructor. Be sure to read our featured articles located in the sidebar of this site. We also suggest visiting the many sponsors that you see on this site for further information in your area of interest.
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