Day Trading Talk

Gregg Hall asked:


Day trading is a controversial word in the world of stock trading. Many see it as a way to make a living off of the fast paced stock market. The Securities and Exchange Commission (SEC) warns against the practice and cautions against getting involved in the practice.

Just what is day trading and why does it cause many to be cautious? Day trading is the practice of rapidly buying and selling stock throughout the day in the hopes to profit from the marginal changes in the market in that specific day. Ideally, this practice allows investors to profit from the fractional increases in the market.

Day traders look at a certain set of criteria when determining whether a stock is suitable for day trading. First, the stock must have a high liquidity. This means that the stock in question has a large numbers of buyers and sellers. The liquidity allows day traders to quickly acquire and then sell stock. Liquidity is based on the volume of transactions on the market, the number of outstanding shares, the total number of shareholders and the number of market makers. Most stocks on the NYSE and NASDAQ have a high degree of liquidity.

A day trader also looks at volume individually, in addition to using it as criteria for liquidity. To be eligible for day trading, a stock should trade at least 500,000 shares a day. Stocks with 500,000 trades a day or more will allow the day trader to acquire or sell a large amount of stock without greatly affecting the price of the stock. Volatility is another factor in evaluating a stock for day trading. The term refers to the actual or expected price movement of the stock. This movement is up or down over a period of time. Day traders look at the volatility of stocks over an individual day. Stocks that change price frequently over one trading day are ideal candidates for day trading. A fluctuation of at least $2.00 per day is recommended.

Finally, a day trader evaluates the price transparency of stock. This term refers to the ability to gather information on the order flow of a stock. Also called market depth, price transparency helps the day trader determine just how much money there is to be made on a certain stock. The Nasdaq II quote system offers information on all bids. Day traders who arrange to access the NASDAQ level II quote screens can assess the strength or weakness of a stock and determine its movement in price.

While day trading is completely legal and entirely ethical, it is highly risky. Day traders usually buy on borrowed money with the hope that they will obtain higher profits through their acquisitions and sales. People who are deemed “pattern day traders” by the NASDAQ and NYSE must have at least $25,000 in their accounts and can only trade in margin accounts. Margin accounts are brokerage accounts in which the broker lends the investor cash to purchase securities. If the value of the stock drops significantly, the investor is required to deposit more cash to cover the margin or sell the stock.

The SEC warns against day trading and has taken many steps to inform people of the associated risks.

The first few months a vast majority of day traders suffer massive financial losses and only a few make it through to become profit-making day traders. For this reason, day traders should only invest money that they can afford to lose. They should never use money for necessities such as living expenses, retirement accounts or second mortgages.

Keep in mind that day traders do not own stocks for longer than a few minutes at most. Stocks are never kept overnight because of extreme risk of prices changing to the detriment of the trader. Day traders do not invest, rather, they speculate on the movement in price of a stock throughout the day.

There are many websites whose sole purpose is to profit off those who wish to become day traders. These websites promise quick returns and offer “hot tips” to their members for a fee. The sources are most often paid to make these recommendations and should be avoided.



Jose

Sacha Tarkovsky asked:


FOREX day trading is big business and there are plenty of FOREX day trading systems tip sheets and guru’s who will promise you they can make you rich.

The problem is odds are you won’t make money and ask anyone selling to you to show you a real time track record chances is are you won’t get one!

FOREX day trading sounds good in theory but doesn’t work in practice. Here’s why.

Currency movements tend to reflect the underlying economic climate and interest rate outlook of the countries currency and they trade long term. Short term movements within a day are random and are the same as flipping a coin.

Even if you think you can day trade FOREX, consider one of the fundamental laws of trading:

Run your profits and cut your loses

Well in day trading, a short trading session is all you have to make money in before you close your position.

You will never be able to run your profits long enough and make enough money to cover your inevitable losses.

When you add transaction costs to losses and subtract them from profits, FOREX day trading will soon empty your account of money and leave you with losses.

It would seem fairly obvious that FOREX day trading on the whole stacks the odds against you, but investors still buy day trading courses and systems through greed and ignorance.

So why is day trading so popular?

Simply people think it restricts risk, but on the flip side it restricts profit as well – and you need to take risk to make a profit – there is no free lunch.

If you can’t run profits enough to cover your losses you will lose pre and simple.

Day traders think they are restricting risk but really they are creating it and stacking the odds firmly against them.

Many people who sell the concept of FOREX day trading are also linked to brokers, who pay commission to them on each transation and there is no better commission earner than someone trading every day.

Fact is, if you want to make money in FOREX Don’t day trade – Do what the pro’s do, catch the bigger profits from the longer term moves.

Have a day trading system on my computer, says its 91% accurate and will cost me just $99.00!

Wonder if I should buy it?

On second thoughts, Let’s give it the benefit of the doubt and ask for the real time track record.

Wonder if I will get one?



Ronnie

Andy Hargreaves asked:


Day trading is basically the buying and selling of stocks over a relatively short period of time, sometimes minutes. It was once only available to floor traders and investment banks but now the Internet has made day trading accessible to anyone with a computer system. There is good money to be made (and lost) using this method.

As an example, a day trader might buy 1000 shares of stock A at 10:00 as the price begins to move upwards on good news, then sell it at 10:04 when the stock price has risen (for example, by $0.50). The day trader would make $500 profit, less his commission which with today’s low commission rates of around $30 or less per trade, that’s a nice $440 or better, excluding taxes.

Day trading usually follows one of two approaches, either beating the spread or attempting to catch short term trends. The spread is the difference between what is being offered for a stock (the bid) and the price being asked for the stock (the ask). With spread trading, you attempt to buy at the ‘bid’ and sell at the ‘ask’ as many times as possible. Spread traders can make hundreds of this type of trade every day.

ECNs or Electronic Communication Networks are a recent development. They are completely electronic exchanges with very low commissions and very fast execution of orders. As a method of encouraging traders to use their networks, some ECNs offer incentives in the form of a rebate. In some cases, this can allow a day trader to make money simply from buying and selling a stock at the same price.

Day trading can be very profitable if you get it right, but you need to research as much as possible and take advantage of the free simulation software that is available for you to practice with before you take the plunge. Remember, day trading isn’t for the faint hearted!



Raymond

David Jose asked:


If you are in day trading, then you must be alert and have a keen ear to what is happening around in stock markets. Day trading involves selling and buying of stocks in a given day. You have to close all your positions in the same trading day. Since decisions have to be made quickly and on the spur of the moment, you need to follow certain day trading stock tips to be able to sail through day trading more smoothly.

What should you do to maximize your profits in day trading stock tips and avoid losses. The answer is very simple – follow day trading tips. First thing that you need to do is to take the services of a broker who is well conversant with what is happening in the stock markets. But just do not blindly approach any broker. Make sure that you reach a broker who has a strong previous track record in day trading. Inquire about the broker you want to consult.

If you are a new comer, then buy some books on day trading. There is a plethora of books on stocks and day trading. You can really benefit from them as there are some beginners guide for new day trading enthusiasts. Plus you will also experience great pleasure reading these books if you are a bookworm and like to read books on financial markets and stocks. You can also start watching business news channels that offer invaluable inputs about the market. The business news channels offer direct information on the minute to minute happenings.

Information is the key to success in day trading. Try to gather as much information as you can because if you have the latest updates on the stock prices, then you will be able to take right decisions on which stock to buy and which stock to sell. You will have ample knowledge on which stock is rising and which is falling.

If you can religiously follow the above-mentioned day trading stock tips, then you will really be able to reap its benefits. Stock market is a volatile place and you have to be street smart if you really want to remain floating in this market and do not want to get drowned.



Gregory