Tip! Unless you use Day Trading, Forex or Currencies back testing plan to back tested your system, I doubt that your confidence level will remain high. That trading system may be a fantastic profitable system.

Day Trading is the practice of buying and selling Stocks during the same day. Ideally at the end of the day there has been no net change in your position. This means that for everything bought an equivalent amount is sold.

A gain or loss is made on the difference between the purchase and sales price.

An effect of this style of Day Trading is that the shares are never delivered or received.

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Day Trading is more risky than any other trading activity. It is very common to use margin with Day Trading (i.e. using borrowed funds), amplifying gains and also amplifying losses. The downside is that substantial losses can occur very quickly.

A common belief is that 80%-90% of day traders lose money.

Day Trading was once the domain of financial firms and professionals along with experienced traders and speculators. It is now very common amongst everyday traders thanks to the internet.

Day Trading is officially called “pattern Day Trading” and means placing four or more buy and sell orders in one day on a regular basis.

Day traders trade various financial instruments including: shares, options, warrants, Foreign Exchange(Forex) and a host of Futures contracts.

Day Trading evolved with the advent of electronic ordering and discount brokers. The home computer and the internet have made the environment friendly to small day traders.

There are a number of strategies by which day traders attempt to make a profit.

Tip! There are a few major statistics on your Day Trading, Forex or Currencies back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal.

Trend following, a Day Trading strategy used in all trading time frames, assumes that prices that have been rising steadily will continue to rise, and the same for falling prices. The trend follower buys a share which has been rising or short-sells a falling share, in the expectation that the trend will continue.

Fundamental analysis is one of the biggest tools of the day trader. The basic strategy is to buy a share which has just announced good news, or short-sell a share on bad news.

Technical Day Trading uses mathematical formulae to decide when a share is going to rise or fall based on previous price action. Many day traders use technical indicators.

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You should avoid the following dangers of Day Trading:

* Many day traders trade without a plan of any kind as to what to buy and sell and when

* In many cases a day is simply not long enough to realise the profit of a share

* Day Trading can be very emotional and gut-instinct based

* Much of the fundamental analysis data day traders use is quite delayed and this will mean that by the time it is received and acted on, the rest of the market, especially the stock broking industry, has already taken action

* Day Trading can mean profits are too low to cover fixed costs, such as brokerage

* Day traders often use leverage which can amplify losses as much as it can amplify gains. For the inexperienced it is a huge risk losing more than you have in your float.

In closing, keep in mind that all stock market activity is risky - there are NO guarantees. Having said that, we have found much better results for our students by teaching them how to develop a customised trading system which takes all the emotion and gut-instinct out of playing the stock market. The results speak for themselves! That’s why we don’t teach Day Trading at HomeTrader - in our opinion, it’s much higher risk for our clients.

Tip! If you haven’t already worked it out, Day Trading can be extremely stressful. If you can’t afford to lose all the money you’re investing, or more to the point, if you have a fear of losing any of the money, don’t do it.

Jon Lynch is Marketing Manager of the Capital Intelligence Group of companies, including HomeTrader - Australia’s leading stock market education centres. We focus on teaching you how to create wealth through the Australian stock market using a customised trading plan or system that is right for you, your situation and your goals. Visit our website and register for your free introductory DVD “Learn To Make Money On The Stock Market” at http://www.learnshares.com.au

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Tip! There are a few major statistics on your Day Trading, Forex or Currencies back testing plan that you need that you will uncover through back testing. The first statistic you need to become familiar with is the R multiple principal.

Day traders quickly buy and sell Stocks during the day, hoping their Stocks will continue climbing or falling in value for the seconds to minutes they own the stock. This allows them to lock in quick profits. Day traders usually buy on borrowed money, hoping that they will reap higher profits through leverage.

Day Trading, however, can be highly risky. Most individual investors don’t have the wealth, time, or temperament to make money and sustain the devastating losses that Day Trading can bring.

Here are some of the facts that every investor should know:

-Be Prepared For Severe Financial Losses

Day traders typically suffer severe financial losses in their first months of trading. Many never graduate to profit-making status.

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Given these outcomes, it’s clear: you should only risk money you can afford to lose. Never use money you’ll need for daily living expenses, retirement, or take out a second mortgage, or use your student loan money for Day Trading.

-Day Traders Don’t “Invest”

They sit in front of computer screens and look for a stock that is either moving up or down in value. They want to ride the momentum of the stock and get out of the stock before it changes course. They don’t know for certain how the stock will move, but they’re hoping that it’ll move in one direction, either up or down in value.

True day traders don’t own any Stocks overnight because of the extreme risk that prices will change radically from one day to the next, leading to large losses.

Tip! Unless you use Day Trading, Forex or Currencies back testing plan to back tested your system, I doubt that your confidence level will remain high. That trading system may be a fantastic profitable system.

-Day Trading Is a Stressful and Expensive Full Time Job

You must watch the market continuously during the day at your computer. It’s extremely difficult and demands great concentration to watch dozens of ticker quotes and price fluctuations to spot market trends.

You’ll also have high expenses, paying your firms large amounts in commissions, for training and computers. You should know up front how much you need to make to cover expenses and break even.

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-Day Traders Borrow Money Heavily Or Buy Stocks On Margin

Borrowing money to trade in Stocks is always a risky business. Day Trading strategies demand using the leverage of borrowed money to make profits.

This is why many day traders lose all their money and may end up in debt as well. You should understand how margin works, how much time you’ll have to meet a margin call, and the potential for getting in over your head.

-Check Out Day Trading Firms With Your State Securities Regulator

Like all broker-dealers, Day Trading firms must register with the SEC and the states in which they do business. Confirm registration by calling your state securities regulator, and ask if the firm has a record of problems with regulators or their customers.

You can find the telephone number for your state securities regulator in the government section of your phone book, or by calling the North American Securities Administrators Association at (202) 737-0900. NASAA also provides this information on its website at http://www.nasaa.org/.

Tip! Now that you`re looking at Day Trading, Forex or Currencies trading as a business, you need to learn some valuable statistics about your system so you can improve it`s performance. You would use a Day Trading, Forex or Currencies back testing method.

Just like anything else in life with potentially great rewards, there’s risk involved with Day Trading. Just make sure you’re in the right mindset and armed with sound information before you through yourself headfirst into buying and selling Stocks.

Kori Puckett provides more self-help and success oriented articles, which can be found at http://www.KoriPuckett.com Find out the secrets Wall Street doesn’t want you to know about, including the most common, avoidable mistakes traders make. Visit: http://invest.koripuckett.com

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Volatility Is The Key To Day Trading
Successful Day Trading requires the ability to spot trends and patterns quickly, and act on them. It0s tough to know which Stocks to watch, but once you have learned the skill, you will be ahead of the game.
You should maintain a 0watch list0. These are a cross section of Stocks that you keep an eye on. Many Stocks have recognizable patterns, and with a little experience at watching the same group of Stocks, many traders can make educated guesses about whether the stock is about to move up or down. Most day traders, at least the successful ones, make trades from their watch list.
There are several criteria for choosing Stocks for your watch list!
Probably the most important is liquidity. I always look for Stocks that trade at least 250K shares daily. If the stock isn0t trading well, you may have trouble selling when you need to get out. If you can0t sell the stock, you0re obviously not going to make any money. I would rather trade Stocks that are moving over 1M shares a day, but certainly never less that 250K. If the stock is too thinly traded, the market makers can manipulate the […]

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