| Day trading is the practice of buying and then | | | | amount in your account in order to borrow. Some |
| selling a stock all within a single day of market | | | | financial institutions require that you have an |
| activity. Day traders dabble in a number of | | | | account balance equal to 25% of the amount you |
| different financial instruments, such as stocks, | | | | are going to trade on margin, and some require |
| currencies, stock options, and futures contracts | | | | 50% of the amount borrowed. And usually, the |
| such as interest rate futures, equity index | | | | trader is required to exit a certain percentage of |
| futures, and commodities futures. | | | | the positions they have in various stocks by the |
| It is not uncommon for a day trader to execute | | | | close of business on the day when the trades |
| hundreds of trades in a single day, whereas | | | | were initially executed. Buying on margin is |
| others might only make a few trades. Some look | | | | extremely risky, because the money you lose on |
| for swings in prices that may last a few seconds | | | | trades is still owed the lender. Margin orders are |
| or a few minutes. Such a trader literally will buy a | | | | not recommended for inexperienced investors. |
| stock and then sell it within a few minutes, or | | | | Another popular trading strategy is called short |
| sometimes within 30 seconds or less. Others look | | | | selling. This is where the trader borrows a stock |
| for changes in momentum and will hop in at the | | | | from a financial institution and then sells it, hoping |
| beginning of an upswing and then ride it out until | | | | that the price will go down in the near future so |
| the upswing is over. This is known as momentum | | | | that the trader can buy the stock back at a |
| trading. Another strategy that day traders often | | | | lower price when it comes time to return the |
| employ is called position trading, where they look | | | | stock to the lender. The difference between the |
| for a stock that is likely to experience a significant | | | | price it was initially sold at and the cost to buy it |
| increase in price over a period of a few days or | | | | back in order to return it to the lender represents |
| even a few months. They hold their position until | | | | the profit for that trader. Short selling requires |
| the price plateaus, and then they dump it. | | | | advanced knowledge of market trends. |
| Most average day traders look at the resistance | | | | After a stock is bought and subsequently sold, |
| and support levels for the price of a given stock. | | | | there is a settlement period that must elapse |
| When a stock has reached its historical maximum, | | | | before the money earned from the sale can be |
| it is said to have reached its normal resistance | | | | used again to place another trade. The settlement |
| level, meaning it probably will not go up much | | | | period is usually 3 full business days. This can be |
| more. When the stock has reached its historical | | | | especially frustrating for neophyte day traders |
| minimum, it is said to have reached its support | | | | who have opened up their first brokerage |
| level, meaning it will probably not go down much | | | | account and then put all of their money into one |
| further. However, new resistance and support | | | | stock, and then sell it the same day when it goes |
| levels are established all the time, so it is not | | | | up, only to discover that they have to wait until |
| always smart to rely on historical price levels to | | | | the transaction is settled in 3 business days |
| gauge future price movements. | | | | before they can place another order. So, if you |
| Most traders look at websites like MarketWire for | | | | are new to trading, do not use all of your money |
| the latest breaking news developments to make | | | | to place a single trade; set aside some money so |
| their investment decisions. If a company has just | | | | that you always have some money in your |
| put out a favorable press release, the price of the | | | | account that is not tied up in settlement, so that |
| stock will likely go up in the short-term, so it is | | | | you can continuously trade without interruption. |
| smart to buy some stock as soon as the story is | | | | I hope this information has helped you to become |
| released, and then sell it when the buying frenzy | | | | familiar with day trading. Try to set aside some |
| starts to lose its momentum. | | | | money for investing and start while you are still |
| One of the most common practices utilized by | | | | young. The earlier you begin, the more money |
| day traders is known as buying on margin. When | | | | you can potentially make down the road. Some |
| you buy a stock on margin, you are basically | | | | day traders make millions, others lose everything, |
| borrowing money in order to buy stock, and of | | | | so you should carefully research the companies |
| course the money that you borrow has to be | | | | you are going to invest in beforehand and you will |
| paid back at a certain time. Most brokerages | | | | do fine. |
| usually require that you have a certain minimum | | | | |