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Day trading, also known as Day Trading, is a very popular and widely used trading method among professional traders. With a short-term intraday trading style, no-hold, overnight orders and quick profit levels, this is a method that requires investors to have sufficient knowledge and experience to respond to short-term fluctuations. So what specifically is Day Trading? What should a trader do if he wants to pursue this method? Let’s go through this article with Exness to find out more.
What is Day Trading?
Day trading is known as day trading, this trading method is for short-term investment when traders do not have much investment experience and knowledge to be ready for long-term investment strategies. Traders will usually open and close orders the day of the day without leaving them overnight. The holding period lasts only a few hours a day with the goal of eating profits in a short time.
Features of Day Trading
In order to effectively use the day trading method, traders first need to understand the outstanding features of the method and also distinguish it from other methods. The unique characteristics of Day Trading are as follows:
- Day trading is a form of short-term trading, so it is usually only traded during a short time frame of the day.
- Order holding time is only from 1 to 24 hours during the day, orders cannot be held overnight.
- Since day trading is characterized by making profits in a short time, traders can always summarize the amount of profit/loss made during the day.
- Day Trading requires traders to spend a lot of time during the day to monitor and analyze charts.
- Day trading is suitable for the majority of trading strategies of both technical and fundamental analysis.
Advantages and disadvantages of the Day Trading method
With any investment method, you need to learn carefully about its advantages as well as disadvantages. This is an important condition that impacts the most accurate and objective decision making. So let’s find out what notable advantages and limitations Day Trading has.
Day Trading Advantages
Fast and solid trading results
Trading of this method only takes place and ends during the day, so traders can definitely calculate the exact profit or loss of a day.
Minimizing long-term risks
In addition to calculating profits because trading only takes place during the day, day trading will prevent traders from having to worry about possible fluctuations during the night. Thus minimizing the risk of losing money.
No swaps
Traders do not hold positions overnight, so there is no need to pay swaps (swaps).
Improve skills
The trading time of the day is usually very short, so traders will not have much time to think but have to decisively make decisions for each movement. Therefore, analytical skills, the ability to recognize situations will be significantly improved over time and accumulate a lot of combat experience.
Cons Day Trading
Too time-consuming and stressful
Spending a lot of time in your day studying and analyzing charts is a must when using day trading, so you may not seem to have time for yourself or other things outside of life.
Monitoring fluctuations on an hourly basis and having to make quick decisions in a short time will put traders in a state of mental stress and pressure.
Participation capital
Day traders make small profits from many orders together in the short term, so if a trader wants bigger profits, he must have a larger initial capital outlay.
High risk for new traders
New investors often do not have much experience and knowledge, making it easy to make wrong decisions in a short time. Financial losses in the initial period of investment are inevitable.
What is a Day Trader? Who should trade with the Day Trading method?
With the characteristics of needing to react quickly to market fluctuations in a short period of time, this style is not suitable for all investors. Investors need to have the following essentials to pursue this method.
Already knowledgeable and experienced
Because it is necessary to grasp market fluctuations to place orders, traders need to have solid knowledge. At the same time, know how to use technical tools and combat experience accumulated over time so that the level of effectiveness when placing orders will be the highest.
Disciplined and psychologically sound
Sharp price fluctuations in a short time are a frequent occurrence. So the price will go against the prediction at first, but then return to the trend and increase as desired. Investors without a strong mentality and high discipline will easily get caught up in the market and close orders.
Spend a lot of time during the day
Day trading is a method that requires investors to spend a lot of time. Therefore, once determined to pursue this method for the long term, investors need to spend most of the day closely monitoring the market to find trading opportunities. Quick response is the key to successful trading.
Quick profit return
A flexible investment style and quick trading results in a short time are easy to see when applying the day trading method. For traders who love this type of quick winning, day trading is definitely the most suitable method.
Day Trading Strategies
Trend trading strategy
A trend trading strategy is a strategy that takes advantage of each positive wave in the short term instead of an entire long trend segment. The trend trading strategy is considered to be quite safe and brings stable profits.
Countertrend trading strategy
The inverse trend trading strategy takes advantage of corrections in the main trend to make a profit. In contrast to trend trading, this strategy is quite risky but offers great profit potential for day traders.
News Trading Strategies
Important news releases during the day will impact the price and cause large fluctuations. This is an opportunity for traders to analyze and assess the market situation, thereby planning and strategizing trading. Identify potential entry points and closing points with expected profit levels using technical tools.
Day Trading Beginner’s Tips
Update information regularly
Always improving trading knowledge and skills is essential when trading with any trading method not only Day Trading, but besides that, an important factor investors also need to spend time every day is updating the news, capturing external events that have a direct impact on the market such as interest rates, etc inflation…
Determine maximum risk
Determining the risk of the amount that can be lost for each trade is something that investors must definitely know and accept. Depending on each trader, there will be a different level of risk tolerance. Once the risk is identified, this will help investors be more ready, better control psychology when entering trading.
Focus on 1 or 2 codes
In the beginning, investors should only focus on 1 or 2 stocks because if the focus is divided among too many symbols, the day’s movements are very likely to be impossible to keep up with. That causes investors to lose the right trading opportunity to seek the desired profit.
Use technical tools
Use technical indicators, candlestick patterns, support and resistance levels,… to confirm signals for each trading strategy, thereby bringing better efficiency.
Assertiveness in stop loss, take profit
The market often fluctuates sharply, so close orders quickly when you see the desired level. It is necessary to make a clear strategy, specify when to stop losses, take profits and pursue strategies, not out of greed but leading to the risk of losses and profits.
Source: Exness
Above is sharing about Day Trading, Blackman hopes to help traders.
