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Can You Understand The Fundamentals In Day Trading?

Jan 18, 2008
Day trading can be understood if and when you understand the concept of day trading. When you speak of day trading, it refers to the buying or selling of a share or commodity in a day. It usually involves the closing of all your share positions at the end of the day trading day. To take part, and be successful in day trading, you have to be very well aware of all the reasons for fluctuations in share and stock prices.

Stocks that move in large amounts in day trading mean that a lot of people have bought this stock. It can also mean one person has bought a lot of shares. This is not the norm in day trading, so it usually means something.

It normally means that these people have some information about the stock which you do not. The feel a large scale investment in a certain stock will pay off. If a stock doesn't move much in day trading, this means that not many people have bought the stock, or not much has been traded.

When you short a stock, you are using day trading's uptick rule. This stops the stock from plunging too quickly or deeply. An uptick has to be used in a market meant for selling stock. If the stock falls without an uptick being used, you will be executed for the fallen price. You can prevent this from happening, however, by placing a limit order.

With a limit order, it will not matter if you are filled or not at this price; you are however ensured that no slippages occur in your stock. As down trends occur faster than uptrends in day trading, with the uptick rule you either miss big moves with your limit order or lose money because of big slippage. It is always better to miss big moves than lose money. This is why it is better to choose limit order when short selling in day trading.

Sometimes you may consider doing day trading in a partnership. This is an advantageous proposition as the person having money and experience proves to be invaluable to the novice in day trading investing. Thus as partners, trading can be done in large sizes and thus lead to better profits.

If you have a partnership, you will both need to agree on the same actions and both be prepared for any contingencies which might arise. It is harder to reach day trading decisions when there are two of you. If you fail to decide on contingency measures in advance, you might end up arguing.

Your partner should be someone you know well and trust totally. If you are not sure about them or you differ in your opinions about trading methods, it would be better to trade alone.You need to conquer the five human weaknesses before becoming a day trader. These are greed, fear, jealousy, ignorance and pride. Fear and greed are common in day trading. Greed makes someone trade too much and for too long. Fear might scare someone out of continuing with their winning streak.

When taking part in day trading, it is important to conquer the five human weaknesses; pride, jealousy, greed, fear and ignorance. Greed and fear are quite common in day trading where greed makes a person trade for too long and in too large sizes. With fear, you may get out of your winning streak too early in the game.

It is best to have a detached attitude if you are day trading. You must be happy to take risks, you need to be flexible and always willing to learn more. Everyone who is in day trading has to start somewhere but the key is learning as you progress, in order to understand more about the day trading market and become better at it.
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If daytrading is not your thing then you might be interested in this Investment Fund
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