Those days are long gone when trading opportunities were available only to the rich and the members of large financial companies or the stock market experts. With the advent of technology and the internet, trading has become quite accessible to anyone, and everyone wishes to do it.
Day trading is one of the most popular methods of trading that can be a very high-paying career as well if it is done diligently. However, it is quite complex and can prove to be very challenging for amateurs in trading. Due to intense market situations and constant fluctuations, even the market and day trading experts sometimes suffer losses.
This article deals with the introduction of day trading in detail.
What is Day Trading?
Day Trading can be defined as the buying and selling of a stock within a single trading day. It can happen in any marketplace. However, most common markets of day trading are foreign exchange and stock markets. Typically, day traders are well-educated and have great knowledge about the market situations to implement the short-term trading strategies and reap the maximum benefits of the day trading.
With experience and expertise, day traders have the ability to predict the significant events in the market precisely, especially those events that can result in short-term market changes.
Some of the most common strategies involved in day trading are:
The purpose of scalping is to make several small profits from small changes in the market prices over the period of a single trading day,
Support and resistance indicators are used to estimate the buying and selling decisions.
Some unexpected circumstances can shock the markets either way. The trading done due to the increased volatility of the stocks due to some latest situation is called the news-based trading.
High-Frequency Trading (HFT) makes use of complex algorithms to take benefits from short-term market changes.
Even though the popularity of day trading has tremendously increased in the past few decades, the dangers and scrutiny of day trading have also increased. The trading practices have become vulnerable due to the heavy usage of the internet in modern-day trading. Moreover, there has been a sharp increase in trading scams that have exploited the new traders and caused them enormous losses.
Despite being a very profitable type of trading, many trading experts also try to stay away from day trading because, according to them, the reward is not worth the high risks involved in day trading. Moreover, economists argue that the process of day trading has become too complex and very unwelcoming towards the new traders.
A common misconception about day trading is that people can get rich quickly through it. It might stand true in some of the lucky cases, but it should be remembered that day trading can only be successful if effective trading strategies are implemented, and the right kind of markets are selected after extensive research. It is one of the very unpredictable trading methods. Hence, time, effort, and investment are necessary to get good at it.