The term 'day trading' is used to define the act of buying and then selling a stock in the same day. A day trader tries to make a profit by taking advantage of small price changes in the market through leveraging a large amount of capital. There are a few common day trading strategies, and these have been listed below:
There are certain stocks that are great for day trading systems, and a trader may choose them depending on their price and availability. A trader will look for two qualities when daily trading a stock and those are its volatility and its liquidity. The volatility of a stock is its estimated price range for that day; this is the price range in which the trader will then operate. The more volatility a stock has the great the profit may be, and the greater the loss may be. The Liquidity is what allows you to exit and enter the stock at a quality price.
One example day trader strategy favorite is Sun Microsystems. The reason why many day traders buy this stock is because it is very cheap to purchase and very liquid and volatile. Other stocks like this are very convenient for day traders.
One of the most popular trading strategies is called Scalping. This practice sells the stock immediate after profit can be made from selling it. This type of trading tends to move very fast, with the traders watching the moment the stock becomes profitable so they can sell it.
Daily Pivots is a strategy that allows profits from the volatility of the stock. This is accomplished by buying stocks during the low time of the day and when the high time of the day comes, the stocks are then sold. When traders short stocks after they have had a rapid upward move, the process is called Fading. This strategy uses the assumption that the stocks have been over bought, and earlier buyers are already making profits from and selling they're stocks. In addition, they also try to scare out any existing or potential share buyers. This strategy is very risk, but if all goes well it can generate a huge profit.
The Momentum strategy utilizes strong trend moves or trading on news releases. The day trader will buy when there has been news releases and then continue on with they're trend until there are signs of reversal.
Generally, daily trading requires the same tools that are used when trading normally. Buying shares is quite the same as normal trading, but the exits are very different. Most of the time, you will want to exit when interest of the stock has decreased. With day trading, investors are more vulnerable to quick price raises and drops, much more so than normal trading. Trading can be a very difficult thing to master, and there are many who try it and fail. But if you create one or more good day trading strategies, with practice and persistence you can stand to make a great amount of profit.
The author has spent a lot of time learning about stocks for cheap and how to find value stocks. Read more about stock trading investments at John Espinosa's website.
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