Day trading is the practice of buying and selling financial instruments such as stocks, stock options, currencies, futures contracts such as equity index futures, interest rate futures, and commodity futures within the same trading day. In any day trading business, a transaction is closed before the market close of the trading day. People or traders participating in day trading business are called active traders or day traders. Most of the day traders are normally employees of bank or investment firm because they have better knowledge and understanding. Most of them are specialists in equity investment and fund management. With the advancement of technology and internet, day trading has become increasingly popular among common investors.
Making Money as a Day Trader
One can make a lot of money as a day trader, but it's not as simple as other small business, currency trading or work from home jobs. Day trading jobs can be done from home but generally need more time and involvement than other work from home business. Day trading involves risks but if one can take calculated risks, he / she can make a lot of money in a short period of time. A beginner or a newbie to this business may even end up losing money. To be a successful day trader, one needs to follow rule of the game and understand some of the basics.
Many people or investors consider day trading an easy means of investing and making money in a short period of time and get rich easily because they don't need to wait for long periods of time to see their investments grow. One should always keep in mind that while it can be fun to invest in day trading, it's important not to allocate more than 3-5% of total equity corpus for the purposes of day trading. This is a safe amount to stick with because if it is all lost it won't ruin the investor financially. Many people get carried away and will take as much as 25% off their equity corpus for day trading and finally they end up losing all their money.
Day Trading Tools and Software
Today there is 24 hour access to the stocks via stock market tickers, stock market websites etc. Many people think that with all these technologies available today, they are not going to lose their money. This is wrong. These tools may help in day trading but they don't guarantee success. One should always remember that day trading is always risky. It is extremely important to keep an eagle's eye on the stocks. Use all available tools, but don't mistakenly think that day trading is safe.
Understanding Day Trading
Any individual who really wants to make money as a day trader needs to learn and understand some of the basics before investing. Learn day trading terminology like futures, call option, put option, delta, and stop loss trigger. An understanding of these terms can be very helpful.
Day Trading Rules
There are some important rules associated with day trading. Firstly, always be aware of worldwide economic status and the company or stocks' business practices. One should always try to choose large cap stocks with high trading volumes. This will help to avoid getting stuck with an illiquid stock. A day trader may also have to book losses. This will improve future profits. As a day trader one can always learn with experience and time. A day trader should set standards and try to achieve set targets.