What is day trading?
Day trading is the buying and selling of a specific financial instrument, primarily a particular stock or currency pair, within the same day. Due to the volatility found in the stock market and currency markets, those are the two most appropriate markets to use for day trading. Forex trading is used to collect short-term profits when successful.
How forex trading works according to experts
While the basics of day trading seem simple at first, simply buy a stock and sell it on the same day when the price rises. In reality, more than 90% of investors who start in this type of operation lose money and end up giving up.
Most experts don’t take the long and painful road of long-term investing. They have acquired the proper knowledge and through experience have come up with tips, methods and techniques to be successful in day trading. In this section, we will tell you the basics of how day trading works from an expert perspective. In this way, you benefit from valuable material that would have taken you years to create yourself.
The first thing you need to have in order to be successful in day trading is to get your emotions under control. If you are investing money that you have destined for important things like your children’s education, forget it. The more you focus on the money, the better your chances of making sudden, emotional decisions in this market. Therefore, to make Forex trading work for you, you need to think with a cool head. The first thing experts have is a plan for how many trades they plan to take on any given day, how much they can afford to lose, and exit strategies on both successful and unsuccessful trades. This is why they are called experts, they know the variables around their trading sessions and have a plan of action for each scenario that could arise in the stock market.
Experts know the math of day trading, which boils down to the fact that you have to outweigh your losses with your profits plus a margin. Put more simply, if you invest $100 and the stock is down $15, that means that particular stock is down 15%. If the stock is now at $85, it would have to go up more than 17% to reach $100 again. This is not a zero sum game. For each loss you have, you must exceed the percentage of your loss to get your money back. You can stay ahead of the game by using a proper stop/limit ratio on all your trades.
Day trading experts don’t trade every day. In fact, they wait for the opportunities where they are most likely to win. Again, this also requires emotional control. In fact, this is his secret. They will only trade when they see that their probability of winning will be at least 2.5 times greater than their probability of losing.
Benefits of day trading
ยท You can have money available almost every day if you make a profit instead of waiting years as some trading strategies suggest.
If you have less than $8,350 in profit from day trading, you will be assessed a rate lower than the average level of income tax.
It allows you to learn to trade faster because you will be making a lot of trades on a given day instead of the usual 1 or more trades per month in long term trading.
It is a short-term emotional boost for successful traders.
