Spark Global Limited reports:
Day trading has surged in popularity in recent years, but what is it and why is it important?
According to the SECURITIES and Exchange Commission, day traders hold a stock for a few seconds or minutes in the hope that the price will continue to rise or fall in order to quickly lock in profits and quickly buy, sell, or short a stock throughout the day.
Day trading is a great way to make money and achieve financial independence. You can day trade in almost any market, though stocks, options, index futures, cryptocurrencies and forex are the most common.
But what is day trading? What is day trading? Today, we’re going to tell you the most important things you need to know about day trading.
What is day trading?
Day trading refers to buying and selling stocks or financial instruments for the purpose of making a profit during a single trading day.
When day traders trade stocks, they want to take advantage of the day’s price movements rather than trading overnight.
For example, if you buy GameStop stock (GME DOLLARS) on Monday, you have to sell it that day to be considered trading of the day.
Take a closer look at day trading and the associated risks
Day traders rely on sentiment and stock charts to generate trading ideas rather than basic data.
These traders typically trade only a small number of stocks or securities — sometimes just one — and have a detailed understanding of how those particular securities respond to events. This allows them to predict how prices will react, allowing them to trade profitably.
This type of speculation is common in stock markets and foreign exchange trading. But day traders can also trade exchange-traded funds, cryptocurrencies, bonds or commodities such as precious metals or crude oil. They can also trade futures or options — different types of derivative contracts.
Day trading is often portrayed in the media as a potentially high return and exciting endeavor. However, most junior day traders lose money because the practice carries a lot of risk that can lead to a person losing tens of thousands of dollars very quickly.
While most aspiring day traders seek financial security and freedom, one must adopt a trading strategy in order to be a successful trader.
Day traders have a wide range of trading strategies to choose from, but it is important to note that not every strategy will work in every market cycle and certain day trading styles may not be ideal.
If you don’t have a good trading strategy, you probably don’t have risk management, and you’re likely to blow up your account in a short period of time, like 90% of day traders.