If you are familiar with stock market investing but new to day trading, there is a lot to learn about this particular niche. Day trading is different from investing in other aspects of the market, and just like launching into any other career, you must educate yourself so that you can see a solid financial return.
Let’s take a look at a few day trading strategies you need to know about to get started.
What is Day Trading?
Just as the name implies, day trading takes place during the day. Financial instruments are purchased during the day and then resold at the close of the trading day, hopefully with a profit. The next day you start all over again. This type of trading is different from swing trading, where you hold on to your securities for days or even months, while investing in the stock market means holding on to your financial instruments for years.
All types of trading in the stock market have risks, but one of the advantages to day trading is that you will know whether you have made or lost money that day. By carefully watching the market and by picking the right securities to trade in, you have the potential for a lucrative career in day trading.
Startup Costs.
Pick the market that interests you and take the time to understand it. According to Warren Buffett, one of the most successful investors of all time, you should be familiar with the company or stocks you are trading in, and you should feel comfortable with their business.
Before you begin day trading, look at your budget and decide how much money you can invest. If you only have $500, then start day trading in the forex market (the short version of the foreign exchange market). With forex, you will be trading currencies, such as the euro and U.S. dollar. When you are trading in the futures market, like the E-mini S&P 500, you can begin with as little as $1,000. However, having $2,500 will allow better returns on your investment.
Day traders thrive on trading with stocks. This is where the real money is made. However, stocks require a startup cost of $25,000 and you must maintain that amount minimally in your account to be able to day trade in stocks. One market isn’t better than the other, it just depends on how much money you can use to get started.
Terminology, Rules and Regulations.
Being involved in the stock market requires education, and a one of the key day trading strategies is to learn the basic language, terminology, and rules of day trading. Learning key phrases will help you understand what the jargon means and will make you a better day trader. It is vitally important that you learn about rules and regulations revolving around day trading. Become familiar with the information on the U.S. Securities and Exchange Commission (SEC) website.
Utilize these day trading strategies to help you become successful in this particularly exciting niche of the stock market. With diligent research, watching the movement of the market, having the right stocks, and choosing a reliable investment consultant, you can find a lucrative career in day trading.
