Day trading is the buying and selling of a security within a single trading day. For this to occur the day trader must open and close each position they take position within the same trading day. This can occur in any marketplace, however it is most common in the forex market and stock market.
Day traders are usually very well educated and well-funded. They make use of short-term trading strategies to capitalise on small price movements in highly liquid stocks or currencies. However in order to make a sufficient profit on these small price movements day traders use high amounts of leverage which involves taking on significant risks. In order to day trader successfully an in-depth understanding of how the markets work and various strategies for profiting in the short term are required. In this regard many people agree that the risks involved in day trading do not justify the rewards.
While it is quite clear that day trading is not for everyone – and that to do so successfully requires someone who is not only well educated but has a large capital base and a willingness to take on larger risks – this does not mean that financial trading is only for a select group of people.
The majority of new comers to trading will engage in swing trading or trend trading. These involve the buying and selling of a security over a number of days or possibly weeks. These traders use tried and tested strategies to capitalise on larger movements in the price of a security over a longer timeframe. Swing trading and trend trading requires less initial funds and much less risk than of day trading. As such a swing trader or trend trader will not require the same level of education or understanding of how the markets works and they will not need the same capital base in order to be successful. For this reason swing trading and trend trading are more preferable options to day trading.
For more on swing trading and trend trading, and an introduction to the requirements in order to successfully trade the markets, visit www.academyft.com and join the Academy of Financial Trading today!