In the simplest terms, Day Trading is basically trading within a span of one day before the market is closed for one trading day. This particular kind of trading is commonly done by the most knowledgeable and most experienced traders. There is a high level of risk imposed by day trading because it is very critical and needs to be used with financial instruments and certain amounts of capital or margin that can decrease possible losses.
Despite the high level of risks imposed by day trading, it does serve a couple of purposes and one of which is to run the markets, keep them going and give a large amount of the market’s liquidity. Although the purpose mostly serves stock markets, day trading can happen in any type and kind of market.
The negative issues some people have with day trading which is the reason why it is the most questioned topics in stocks exchange markets is because most trading scams have been centered on this particular method. These controversies came from investors who have reportedly promised returns bigger than usual. One particular controversy was that of the mutual fund trading scandals which were started by institutional investors and was initiated through the use of day trading.
Despite the image that a number of controversies and scandals caused and gave day trading, it still remains a legal trading method although one must always remember that it is only for those with a deep knowledge and understanding of market processes and needs to be backed up by certain day trading strategies before one can profit.
Positive Risks and Negative Risks through Day Trading
Without the image that certain controversies give day trading, the method is still very critical and must be backed up by background on the strategies on an everyday trading situation. One very critical factor is the need to focus on every trading minute and an hour inside one trading day because one doing day trading must be able to figure out chances of high returns on certain points of the day.
Day traders could also not benefit from an overnight turn of events that drives the following day’s stock up and this could be a bad thing since a lot of overnight gap instances offer very positive returns on traders.
As much disadvantages and risks day trading inflicts, there is also a number of chances to profit from trading within a day. Traders using the method can earn a profit even with a market going on an upward and downward trend. There is also a chance one can profit from a falling market with short selling. Given a trader owns a certain level of background on the processes of the marketplace, a huge profit can be earned through day trading.
There are also lesser risks compared to non-day trading methods which can give traders higher risks overnight and over time where a certain market stock can suddenly drop the next day. In day trading, future events cannot affect the way your stocks will rally or drop.
Day trading will require one trader to go through strategies that will best work for them and the situation. This will result in practice and mastery of the fundamentals that’s why in the future, one will not need to spend a huge amount of time poring over charts with high stock volumes and still make a good amount of profit. This can also cause stress on a
Day Trading or Not?
Regardless of the number of negative risks from day trading, it is still used in trading nowadays and is still important by keeping the markets moving and flowing. Individuals who are just starting out with trading for the first time should not opt for this method since it requires a huge amount of time studying and poring over charts and the stock itself which has to be backed up by an instant verdict and decision.
To sum it up and for lesser risks to happen, only experienced traders with a strong background and with enough resources should venture in day trading especially if one is looking for a good profit return. Traders looking to try the method should invest in a certain amount of time studying strategies for specific instances in day trading. A lot of practice will also be needed before trying out a risk-filled strategy with hopes to bring profit.
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