Day trading occurs when you buy and sell a stock within the same day. The reason you would buy and sell in the same day is to turn a profit with a short term movement in the stock price. If you hang on too long, the up tick will have passed and the stock could plummet. More times than not, people wait too long and as a result they don't make money.
If you are new to trading stocks, it would make sense to start with pretend trading. There are plenty of sites that allow you to trade virtually. This means that you are not using real money, yet you are choosing your stocks, buying and selling as if it were real. You will accrue pretend gains and pretend losses. Don't laugh! Many people started out this way and then went on to make money when they felt confident enough to become a real day trader investing their real money.
Although the name is day trader, some day traders hold on to stocks for as long as three weeks. They make these decisions based upon market indicators. In order to educate yourself about the market you will need to get your hands on some day trading tools.
1. First you will need a computer with internet access. Your computer should be equipped with a fast CPU speed in order to process the trading charts and graphs quickly.
2. You need to set up a day trader brokerage account. There is an initial investment of a minimum $500 to $2,000 depending upon the brokerage dealer.
3. Because you are trading in such a compressed period of time, you cannot wait for delayed information, so you will need access to real time market data. Many day traders prefer to get this information from their brokerage dealer.
4. Learn technical analysis tools such as range trading or strength index so that you can double check the indicators leading you to buy or sell before you actually do it.
Before you start trading you should set up a few rules for yourself. Limit your losses. You can put a dollar amount on what you will allow yourself to lose in one day, but you must stick to it. Many day traders make the mistake of holding onto stock too long and rather than sell when the stock initially started losing money, they hold onto it thinking the market will change and they can make back what they lost. Instead, they lose even more money than they would have had they sold when the stock hit their loss limit.
Don't invest every penny you own in day trading. That simply is not smart. Just as if you would like to hold a stock portfolio of diversified stocks, you also don't want to put all of your eggs into the day trading.
You do not have to trade every day to call yourself a day trader. Skip a day if you need to attend to other business or if you aren't up to the task. It is better to be able to focus your full attention to day trading than to participate half heartedly.
Now that you have an idea of what it takes to be a day trader, do you still want to do it? If so, do an Internet search for “virtual day trading” to start your practice.
The Rumpled One is the Creator of the Trapline Day Trading Method. Make six figures per annum day trading just one stock. Get his free system of Fading the Daily Gaps at : http://www.daytradeformoney.com
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