Day Trading Basics You Need to Know

Article by Shane Engle

Those who want to learn how to trade stocks or have actually dabbled in stock trading for quite some time now will know that day trading, compared with the more traditional trading strategy, can result in more generous profits per transaction. Profits can also be earned quickly and easily without having to wait for weeks and months, checking on the stock trends and market movements. The fast turnover is due to the fact that in day trading, positions are held over a single day and are closed once the day’s trading has ended.

Day traders generally benefit from buying and selling stocks based on the fluctuations in the market over a single day. Apart from the fact that you have to learn how to trade stocks, you need to learn a few strategies that are more geared toward the fast nature of day trading. This article presents basic information you need to know about day trading to help you get started.

What is “day trading”?Day trading refers to the process of buying and selling shares and stocks within a single day, hence its name. The operative principle behind day trading is that the trader observes fluctuations in market prices and then capitalizes on these by buying and selling depending on the conditions. Compared with traditional stock trading, in which you can hold positions for weeks and months at a time, day trading transactions are done within the day. For this reason, some people have come to consider day trading as far riskier and only reserved for those with more advanced trading abilities.

Can anybody engage in day trading?In the past, laymen cannot simply open a book and learn how to trade stocks. Stock trading used to be the domain of stockbrokers who are considered experts in the field. Today, especially with the popularity of the Internet, anyone can actually learn how to trade stocks online and engage in actual trading from the comforts of one’s home. For this reason, almost anybody can now engage in day trading. Nevertheless, some degree of expertise is required, so those who want to gain from day trading must have had lots of practice and experience in doing so. In addition, day trading works best for cool, logical decision makers rather than emotional and impulsive traders.

What are the main advantages I can get from day trading? There are many advantages you can get from day trading. First and most important of all is the faster turnaround and higher profit you can gain. This is why many people are drawn to engage in day trading despite its risky nature: they want to earn more and do so quickly. Since day trading is essentially done on a much faster pace, many traders prefer this kind of excitement rather than hold positions for longer periods of time. Day trading is also for those who do not have patience and time monitoring stocks for weeks or months.

If you are interested in being a day trader, just remember that the level of expertise required could not be developed. Although it is easy to learn, you have to understand the basics, learn how to trade stocks, practice, gain experience and be prepared to face the challenges involved.

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