Prior to day trading, if you wanted to buy a stock, it was quite a complex process. First and foremost you would have to have a broker to order. The order would then be sent to the exchange floor to a specialist that would find a seller, match them with the buyer and actually write a physical ticket. Then confirmation would be sent back to the brokers for both the buyer and seller. Commissions of 1% were always charged to the total amount of the trade, in addition to what you paid for the stock. Then in 1975 things began to change as the SEC made fixed commissions illegal. This is when we started seeing discount brokers for the first time.
Day trading is simply buying and selling of stocks, options or commodities and the ability to have your positions closed by the end of the trading session. Unlike prior to 1975, now days you don’t need to be a financial company or professional investor to be a day trader, anyone can trade stocks as rates are extremely low and the entry point is cheap. Additionally, technology advances have allowed casual workers to start trading from home with nothing more than a multiple monitor computer and an internet connection.
There are several different strategies that day traders use and I’m going to go over a few of them:
Trend trading is the belief that if a stock is rising it will continue to rise, or if it is falling it will continue to fall. The general rule is that you try to enter the trade in the direction of the trend and then exit once the stock breaks this trend.
Contrarian trading is the assumption that prices have been rising or falling quickly and with momentum and therefore the momentum will soon reverse and start going in the opposite direction.
Channel or Range trading is the assumption that because a stock has typically traded within a certain price range or channel that it will continue to do so.
Scalping is sometimes called spread trading and allows the trader to take profits where gaps expand and contract. Technical indicators such as support and resistance level now make this a popular strategy to use.
Tremors or New Event trading is what it sounds like- paying close attention to social signals that might cause a spike or dip in price. This is a very volatile way to trade.
There are of course other strategies that can be used as well buy these seem to be the most popular among modern traders. Of course, having the right trading software and proper equipment, such as a multi-monitor computer, can make all the difference if you are just starting out as a day trader. There are also a number of quality forums and education programs that can help you get your foot in the door as well. Hopefully though, this article will help you understand where to start. If you truly want to be a day trader, then reading and education will make all the difference in your success.