Posted by Flynn Financial Group Inc

Do You Want To Be a Day Trader? Then here’s What You Need to Know

Do You Want To Be a Day Trader? Then here’s What You Need to Know

People who trade for a living rather than as a hobby are called professional day traders and they are well-established in the field. In-depth knowledge in the market is what they possess too. To be a successful day trader, below are some prerequisites required:

Experience and knowledge in the marketplace: Individual without an understanding of market fundamentals but still attempt to day trade will often lose money. 

Sufficient capital: Risk capital is what day traders use only which they can afford to lose. This helps eliminate emotion from their trading and of course, protect them from financial ruin. To capitalize effectively on intraday price movements, a large amount of capital is often necessary. 

Strategy: An edge over the rest of the market is what a day trader needs. Swing trading, arbitrage, and trading news are some of the several different strategies day traders use. Until these strategies produce consistent profits and effectively limits losses, these strategies are refined. 

Discipline: Without discipline, a profitable strategy is useless. Many traders fail that meet their own criteria that’s why they will end up losing money. As they say, “Plan the trade, trade the plan”. Without discipline, success is impossible. 

How Day Trading Works

Day traders rely heavily on volatility in the market in order to profit. If a stock moves a lot during the day, then that may be attractive to a day trader. Earning report, investor sentiment, or even general economic or company news made that possible to happen. 

Stocks that are heavily liquid gives them the chance to change their position without altering the price of stocks are what day traders also like. Traders may take a buy position if a stock price moves higher. A trader may decide to short sell so he can profit when it falls when the price moves down. 

Day traders are usually looking to trade stocks that move a lot regardless of what technique that day trader uses. 

How You Make A Living In Day Trading

Working alone and/or working for a larger institution are the two primary divisions of a day trader. Day traders who work for larger institutions often do it for a living. Access to a direct line, a trading desk, a large amount of capital and leverage, expensive analytical software, and much more are the advantages of day traders for a living. Easy profits that can be made from arbitrage opportunities and news events are what these traders are typically looking for. Before individual traders can react, these resources allow day traders to capitalize on less risky day trades. 

Managing other people’s money or simply trading using their own is what an individual trader often do. They often have strong ties to a brokerage (because of the large amounts they spend on commissions), access to a trading desk and access to other resources. However, they cannot compete directly with institutional day traders because of the limited scope of their resources. Instead, they are forced to take more risks. To generate adequate profits on such small price movements in highly liquid stocks, individual day traders typically day trade using the technical analysis and swing trades combined with some leverage. 

What Day Trader Requires

Access to a trading desk: traders working for larger institutions or those who manage a large amount of money is what this is usually reserved for. Instantaneous order execution which is particularly important when sharp price movements occur is what the dealing desk provides to these traders. For example, day traders looking at merger arbitrage can place their orders before the rest of the market is able to take advantage of the price differential when an acquisition is announced. 

Multiple news sources: It is imperative to know when something significant happens since day traders get the majority of their opportunities to capitalize on the news. Dow Jones Newswire, constant coverage of CNBC and other news organizations is what the typical trading room contains to have access to and software that constantly analyses news sources for important stories. 

Analytical software: For most day traders, trading software is an expensive necessity. Those who rely on technical indicators or swing trades rely more on software than news. 

Should you start day trading?

Day trading as a career can be very difficult and quite a challenge. It also requires a lot of time. But, if you do decide that the thrill of trading is right for you, then always remember to start small. And finally, try and keep the emotions out of your trades because there is a high chance you can stick to your plan the more you can do that. You might be headed for a good career in day trading if you follow these simple guidelines mentioned. 

Flynn Financial Group Inc
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