What is Day Trading?

Day trading consists of buying and selling the same securities within one day. It’s not investing, per se, but capitalizing on the price movements found within a 24-hour period and making money that way.

What-is-Day-Trading

What Day Traders Look For

Day traders look for three elements in securities. These are:

  • Liquidity –easily obtained securities, so there is little lapse between purchase price when ordering and purchasing
  • Volatility –securities changing in value over a short time, ideal for day traders
  • Volume –how much a security is traded during a specific time period. Analyzing volume indicates trend health.

How Traders Choose a Brokerage

Day traders choose a brokerage based on various factors, including an easy-to-use trading platform with up-to-the-minute data. Other important aspects include:

  • Rates – fees for various trades eat into the day trader’s profit margin, so day traders want competitive rates
  • Service – customer service is crucial. Look for a brokerage with 24/7 customer service access via phone, text or email
  • Leverage – a borrowing amount for a margin account, expressed in ratios. A 2:1 ratio means you could purchase 100k of stock if you had 50k in your account.
  • Commissions – lowest commissions are not always the best – day traders want brokerages offering a discount on long-term accounts.

Types of Day Trading Orders

  • Market orders – buying or selling a security at an asking price.
  • Limit orders – buying or selling a security when the price reaches particular threshold. Buy is below the current price, while sell is above the current price.
  • Stop Order- the opposite of limit orders. Buy the security when the threshold is above the current price, and sell when it is below the current price.
  • Stop Limit Order – similar to stop orders, except it can be used at a better price than threshold.

What You Can Trade

  • Stocks – shares of publicly traded companies
  • Options – derivatives allowing purchasers a contract to buy or sell securities at a certain price at a specific time
  • Forex – foreign exchange markets, open 24 hours a day on weekdays, with no daily closures necessary
  • ETFs – exchange traded funds, securities tracking indexes, commodities or bonds, traded like securities.

Pitfalls to Avoid

When day trading, never let emotion rules your decisions. Rely on data rather than “feelings.” Learn to discipline yourself and develop a strategy. Keep good records so you can learn from your mistakes.

Beginner Day Trading Strategies

Getting started in day trading requires several essentials. Novice day traders require the right platform and software to begin their trading. Before they even get to that point, however, they must learn and develop strategies for their initial day trading. As day traders progress and become more experienced, they can utilize more sophisticated trading methodologies. Beginner day traders should focus on the relatively simple and tried-and-true strategies, as there’s a steep learning curve. Once you find a strategy that suits you, stay with it until you have it mastered. It makes no sense for a beginner to move back and forth between trading strategies until they have full confidence in what they are doing.

Information is Power

With any endeavor, the more information you possess, the more likely you are to become successful. Accurate, up-to-date information is an absolute necessity for day trading. You need constant access to financial/business news sites, as well as regular news sites covering national and international events. Trouble breaking out in one part of the world can affect stocks, whether directly or through the supply chain.  Good news can put stocks on an upward trend, but you can make money on bad news via shorting stocks. Mastering technical trading charts is a necessity, as they let you know about specific trends.

Treat Day Trading Like a Business

Sometimes the most crucial strategy for getting started in day trading is also the most obvious. Day trading is a business, and any business needs a plan. You know you need a computer and reliable, high-speed Internet access. What happens if your computer crashes? It’s probably happened to you in the past. A backup computer prevents you from going into meltdown mode. You’ll also need stock scanning software to locate the right stocks for your strategy. An economic calendar reminds you when major data releases are due, and that’s when prices can move faster than usual.

Your business needs a budget, and not just money for trading. Allocate funds for taking online classes in day trading and technical analysis. Once you have the basics, use a stock simulator to get your trading feet wet before heading into real-world day trading. For best results, work with the simulator for at least three months until you have your strategy down pat and are profiting overall in your simulated trades.

As well as a business, day trading is also a discipline. Once you get the hang of trading, trade consistently at the same times of day. If you work another job, it’s often hard to day trade during prime trading hours, which are the first two hours after the market opens and the last hour prior to closing. No matter where you are located, that’s equivalent to 9:30 – 11:30 a.m. Eastern Standard Time and 3 to 4 p.m. EST. If your time is truly limited, stick with morning trading. It is quite possible to make a decent income day trading only a few hours daily, if you develop your strategy and skills. You will not make a decent income if you only trade once in a while on a casual basis. Day trading does not work that way.

Trading Strategies

What exactly constitutes a trading strategy? The criteria may differ according to the methodology, but it’s always objective. Trading strategies consist of:

  • Conditions required for entering and exiting trades
  • Timeframes
  • Researching and executing the math behind the strategy
  • Historical analysis to determine performance feasibility
  • Money management

When starting out, you want a strategy that helps you learn how to trade, while keeping losses at a minimum. Shouldn’t that state “profit as much as possible?” Not at the beginning. Expect to lose money at day trading until you educate yourself, train and get the hang of it. If you happen to come out ahead in the early days, that’s great, but now is the time to concentrate on getting the hang of trading and also knowing when to cut your losses. The latter is a trait common to all successful day traders. Remember that you will learn from every trade. Also keep in mind that every day is a completely new day in the market, and that each trade differs from another.

Not So Fast

Day trading is exciting. That’s a great part of its appeal. Beginner day traders may want to jump in with both feet, but that’s a bad idea. Forget the adrenalin rush, and hone your initial strategies by conducting infrequent trades. Once you have completed a trade, analyze every aspect, including your emotional reaction. Learning to control your emotions during trading is the key to becoming a successful trader. Begin with trading in larger time lots – trade in minutes, not seconds. Once you’ve set a target and a stop, leave them alone. Once you have a few dozen trades under your belt, and a good understanding of what went right or wrong with each one, you can graduate to more frequent trading.

Simple Moving Averages

Simple moving averages (SMAs) are classic trading strategies, and easy formulas to figure out. Just take a stock’s closing price for X number of trading days, then add them together and divide by the amount of trading days. That number is your SMA for that timeframe. Traders usually go with 5, 10, 20 or 50 trading days to determine the SMA, but the number of days in question depend on whether you want short-term, intermediate-term or long-term trends. Day traders most often use the five-day SMA, as it the most reactive. Experienced day traders may use SMAs based on hours or even minutes of a stock’s price. The SMA is among the easiest trends to follow in a chart.

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With SMAs, you’re on the lookout for a stock breaking out – heading upward – or trending downward. The latter is for shorting purposes. Day traders don’t want to bother with “sideways” stocks, or those with SMAs that move a little bit in either direction, but rarely make a significant move. Such stocks can get stuck sideways for months or even years.

Breakout Trends

Breakout occurs when a stock rises above its resistance level – a level it previously didn’t seem to rise above – and high volume generally accompanies this benchmark. That volume may last a few hours. You’ll find stocks with breakout potential through technical trading charts. As you learn to decipher chart symbolism, you’ll notice that virtually completed flags, head and shoulders and triangles often indicate breakouts. Positive news about the company or a new management team may herald a breakout.

Fast action is needed for successful breakout trading, and timing is of the essence. One caveat: Even though you have to act fast, you must confirm the breakout trend is legitimate. Otherwise, your breakout could end up a fake out. The fake out occurs when the stock appears poised to rise above the resistance level, but fails to do so. If the breakout is genuine, stay tuned to the charts.  If the breakout heads south, cut your losses at once. Use the stock’s previous support level as your exit price.

Momentum Day Trading

Day traders want to find stocks that move a great deal in the course of a trading day – those having a great deal of momentum. The concept behind momentum trading is identifying and buying those stocks just prior to their big moves. How long the trader holds on to a stock depends on the stock’s momentum in either direction. For some stocks, it’s 10 minutes – for others, virtually the entire trading day. A day trader wants to aim for the point just before the top of the momentum, so he can cash out before the stock starts heading in the other direction. Momentum in a stock usually occurs after a specific event. Earnings growth may top expectations, or the company made an acquisition.

A Personal Risk Strategy

Day trading is inherently risky. There’s no getting around that fact. Even experienced traders only profit from about half of their trades. What those traders do have is a personal risk strategy, and it’s wise to develop your own risk strategy as soon as possible. Successful traders don’t risk great amounts of capital on any one trade. At best, any individual trade accounts for between 1 to 2 percent of their trading funds. When you’re starting out, stick near 1 percent of your capital per trade.

The SureTrader Advantage

SureTrader offers the best platform for beginning day traders. SureTrader allows you to find the strategy that works for you. Take advantages of our free $100K demo, which allows you to hone your strategic skills and learn to trade before risking any of your own money. Our state-of-the-art technical charts provide trends and momentum and stock histories, all individually designed for your trading strategies. Day traders also have access to 10,000+ stocks for shorting, the largest number available on the internet. Our low fees and commissions are just additional reasons to make SureTrader your day trading platform.

How to Profit from Day Trading

 

Profit is the whole idea behind day trading. Making a profit from day trading requires knowledge and strategy. SureTrader can help you acquire both of these necessities. All successful trading relies on buying low and selling high – with the exception of short selling. Conventional investing advises the buy and hold method. Day trading takes the opposite tack – it’s all about market timing, often down to the split second. That’s another aspect day traders enjoy – the sheer excitement of trading leading to profit.

The Right Platform

Making a profit from day trading isn’t possible without a state-of-the-art platform offering real time information, charting features, and lightning fast executions. That’s what we offer at SureTrader. Our easily navigable platform is intuitive. We provide traders with a 10,000+ shortlist, the largest of any brokerage. SureTrader also offers 6:1 leverage for intraday trading.

Our 100K Free Demo

Day trading requires discipline and strategic development. Simply jumping into this world without proper training is a guaranteed way not to profit from day trading. Many people do start day trading without fully understanding the methodology or using the wrong tools. There is always risk in day trading, but as in any other endeavor, knowledge and planning makes a huge difference in the outcome. In day trading, good research and strong data is always the key to success. Using our virtual, free 100K demo allows you to learn and hone your day trading skills before actual funds are involved.

High Betas

When day trading, you want stocks with high betas. That’s the term used for how fast a stock may rise or fall. You want a stock with high trading volume and to buy it when its starts its acceleration, then sell quickly for a profit. Stocks trading at very low prices but with high volume are another way to profit from day trading. For such stocks, volatility is at least 1 percent daily. Some day traders want as much volatility as possible, while others concentrate on less volatile but high volume stocks with sufficient price moves to make money. Some traders react primarily to events moving the markets, such as international news, earnings reports and the like. As you practice your trading, you’ll discover the type of stock and action making you the most comfortable – and making you money. There’s no one-size-fits-all for successful day trading, but all profitable day traders do their homework.

Risk Management

Proper risk management is essential for making a profit from day trading. It’s usually not wise to risk more than 1 percent of capital on any individual trade. Treat your day trading like the business it is, even if you are only doing it part-time.

Getting Started

Get started with SureTrader, a platform fitting any online trading style. In addition to competitive rates and excellent customer service, SureTrader offers pre-and-post marketing trading, so you can react to events shaping the markets even when the market is closed.  At SureTrader, you can trade wherever you are via our free mobile app.

What Stock Trends Are Taking Shape for this Year’s Summer Season?

 

Many stocks or industries have seasonal trends, and summer is certainly no exception to that rule. Historically the stock market slows during the summer season as families vacate their homes for road trips and visits to entertainment destinations. There is even a well-known saying among investors: “Buy in May and go away”.

Summer is Here – What Stock Trends Are Shaping Up?

Although trading seems to slow during the summer months due to vacations and other seasonal activities, those months have also been known to experience at least a respectable rate of growth during the same period.

Many large investors shed higher-risk elements from their portfolios as they prepare to take time off since they will not be as actively monitoring market activity.

What are the Bright Spots of Summer Stock Trends?

Over recent years, some of the winners during summer trading periods include segments in or closely tied to health care, utilities, and energy markets. Those markets that tend to drop are such stocks as material and industrial sectors along with a general lag in consumer discretionary spending. Some of these appear logical for many traders since travel and summer pastimes focus traders and their families away from large purchases as dollars are put to work elsewhere.

Sam Stovall of Standard & Poor’s Equity Research summed it up quite succinctly in stating “a lot of investors are more focused on their tans than their portfolios.”

There are certainly exceptions that tie to where families are spending those dollars: hospitality, entertainment venues, and travel. Whether that means an expensive trip abroad, vacations to popular theme parks, or just getting away from home for a few days, travelers hit the road or take to the air in droves while the weather permits and children are away from school for a few weeks or more. Companies engaged in these markets make a large percentage of their profits during the summer months, much as retailers look to the holidays for their primary revenues.

Other highlights for summer investors are outdoor outfitters such as Cabela’s and “big box” stores such as Lowe’s and Home Depot that supply consumers with grills and accessories, yard care equipment, and outdoor furniture.

Summer Stock Trends and Tools

Timing can be an incredibly valuable time as traders watch for lowering stock prices to time buys just as values will begin to trend up. That may mean waiting for the summer downward trend to begin its reversal and start climbing in the Fall.

If you’re a vacationing trader there are some tools to consider that can keep you in touch with your market segments while you travel:

Portable computers in the form of systems like the Microsoft Surface Pro or high-powered tablets and iPads that combine the power of a computer with the portability of a tablet.

AMPL Smart Bag – don’t worry about missing a trade due to low power when you latch on to this bag equipped with SmartBatteries to keep your tablet, smartphone, or laptop ready whenever you need them.

goTenna – if you have a device but no connectivity you can’t make your trades when the time is right. This simple and portable antenna-like device lets you sync your Android or iOS device via Bluetooth-LE to put you on the air for trading where there is no cell coverage or Wi-Fi available.

With devices like these, you’re able to access your online broker anytime, anywhere. Enjoy the summer season while staying connected to maximize your trading success.

SureTrader gives our clients the services and capabilities needed to optimize their trading activity. Our selection of trading platforms includes a free web-based trading environment supporting both Android and iOS devices. SureTrader’s desktop software has powerful advanced features that rank it as the best trading platform available.

Our superior level of support means contacts with real people to resolve trader problems quickly and to your complete satisfaction. Lightning-fast accurate trade execution is another advantage for SureTrader customers.

Contact SureTrader right away to get started investing online with the best in online brokers.

 

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

How to Identify Market Trends and Make the Most from Them

Just What Is Meant by “Identify Market Trends?”

If any given day trader or investor could accurately predict the direction individual stocks or market segments would take over even a short period of time, the potential for gains would be significant indeed. Unfortunately, the natural volatility of markets combined with myriad variables that can influence the prices of stocks or supply and demand for commodities makes such accuracy unlikely, if not totally impossible. This being the natural environment for investors, it becomes imperative to utilize every advantage and tool available to make such predictions reliable and consistent in order to maximize gains and minimize risk.

Identifying trends can reveal the right time to execute buy orders in financial vehicles and just as importantly, this knowledge can trigger the right time to exit an investment or to avoid a purchase that had previously appeared attractive. Trends may be either static, upward moves, or declines. If a day trader is confident that a positive trend is taking place in particular biotech stocks or an individual precious metal such as gold or silver, a buy order can be placed with their online broker and then monitored closely for the anticipated trend to increase the value to a predetermined exit price. This is where the adrenaline begins to flow for traders; while tracking investments and exiting at precisely the right time – or at least while in positive territory.

Conversely, buying an asset then detecting a downward trend signals the trader to reverse direction and exit the investment quickly to minimize losses.

How Do Traders Identify Trends?

There are many tools available to investors and day traders that contribute to success in identifying market trends:

News – often, current and evolving global news events will significantly impact markets. Political unrest in countries that supply essential commodities such as oil or food products like coffee or wheat can drastically impact supply and with demand being relatively equal, prices can skyrocket. Getting into those markets at the right time can produce considerable profits.

Long-term trends are not the primary concern of the typical day trader who focuses on turning investments quickly – usually at least on the same day, and often within minutes or hours in a single trade session. There are a great number of indexes available for specific markets and also indexes that focus on overall performance or market volatility (VIX index). Monitoring indexes related to your chosen strategy can provide initial visibility to trends. There are a number of indicators commonly put to use by traders to identify trend movement, as well.

Charting – one of the simplest and most straight-forward methods for visualizing trends is a simple chart of an individual stock over time. This demonstrates clearly whether the stock is on an upward trend or a decline. Here again, past performance is not a guarantee of future results.

Corrections – Trend lines for any given investment can change on a moment’s notice and may or may not indicate a reversal of the trend. Day traders in particular need to take close notice of such corrections to determine if they believe there is reason to react or hold their position.

Online Brokers Help Traders Identify Market Trends

Online brokers may provide clients with tools that provide insight into market trends:

  • Graphing and charting tools – simplified visualization of trends in markets and individual stocks
  • News feeds – keeping customers up-to-date on evolving events, locally and globally
  • Stock information in the form of stock tickers, watch lists, and alerts

SureTrader furnishes every client with tools that maximize gains and trade efficiency. We provide multiple platforms to suit every need including our free web-based trading platform and our powerful desktop trading platform loaded with sophisticated and advanced features. Mobile platforms support both Android and iOS devices.

SureTrader’s award-winning support includes contact with actual people 24×7 to help clients with questions and to resolve every problem quickly and to the client’s satisfaction. Fast and accurate execution of trade orders enhances service to our clients.

Contact SureTrader right away to get started investing online with the best in online brokers.

Disclaimer: SureTrader Blog is not intended for U.S. persons. Stock information is not to be viewed as buy or sell recommendations.

Category: Trading Tips

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