Day trading, as you can probably tell from the name, is the act of opening and closing trades within one day. That is, there’s no transfer of positions overnight, and as a result, there’s no swap.
Is Day Trading Right for You?
Day trading, like every trading style, is not for everyone. Here are a few things to consider so you can decide if this is for you:
What is Day Trading?
Day trading, or intraday trading as it’s also known, was initially driven by speculators and became more widespread as online trading grew in popularity. Day traders mainly use technical analysis because the fundamental analysis is rendered practically meaningless when you’re looking at such a small window of time. Day trading transactions range from several minutes to several hours.
1 – Capital Requirement
In order to begin day trading, you have to choose a broker and meet their minimum deposit requirement. When you’re ready to get started, stick with an investment amount and trade size that you can handle.
2 – Discipline
Discipline is highly valued in trading, just like in any area of life. Day traders use a preset trading system and strategy. They have to be able to sit in front of a screen, spot short-term trading opportunities, and be disciplined enough not to take advantage of them within the day.
3 – Money Management
A day trader needs to know the basic principles of money management so they can control their risk. It’s an absolute must for day traders to know and implement money management rules into their trading strategies. And speaking of which…
4 – Trading Strategy
Day traders use a clear and actionable trading strategy because trading without a strategy can incur losses. So as a day trader you would work on a demo account to build and test your trading strategy before you start live day trading.
There is a heated debate among traders about how successful you can be in day trading. Some believe that it’s a minefield that only experienced traders with several years of FX trading can cross. Others consider day trading to be an opportunity for traders to earn significant profits in a short amount of time. However you look at it, a few fundamental requirements need to be met before starting out as a day trader. On top of the list is capital, along with knowledge, strategic thinking and actionable tools, all which will help better position you to leverage the market’s many opportunities.