How to Day Trade Stocks
Day traders sit in front of computers buying and selling stock throughout the day, hoping it will go up in value. They own stock for only a few minutes or a few hours. The number of trades made in a day may vary from two or three to hundreds. Day traders often buy stock on borrowed money, making day trading extremely risky. Some day traders are bank or investment firm employees, while others are individuals working for themselves.
- Difficulty:
- Moderately Challenging
Instructions
Things You'll Need
- Stock pickers' group
- Trading theory
- Day trading software
- Trading account
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1
Buy day trading software. To day trade stocks, you need three kinds of software. Data software provides price feeds. Charting software charts prices and offers technical analysis indicators. Trade execution software allows a trader to execute trades.
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2
Open an account with a direct-access broker. The law requires that you have a minimum of $25,000 in the account at all times.
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3
Research a company before you buy its stock. You should review historical charts to learn about its past performance and look at its earnings report to find out if it is profitable.
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Join a stock pickers' group. Stock pickers are investors who pick stocks or mutual funds based on supposed mismatches between the current market prices and their hypothetical real values.
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Decide on a trading theory, such as Bollinger Bands. To make it simple, Bollinger Bands are average price levels above and below the current price. When the stock price crosses these levels, you should either buy or sell the stock.
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Keep abreast of business news. Daily factors can influence the movement of any stock you are considering trading. Company news, press releases and national news are all good sources of information.
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Tips & Warnings
Check out any day trading firm you are considering doing business with. Call your state securities regulator and confirm that the company is registered with the SEC. Also inquire about any record of complaints the firm has had with regulators or their own clients. You can find the telephone number for your state securities regulator in the government section of your local phone book.
If you are considering working for a day trading firm, be aware that it makes money whether you do or not. The firm will provide you with the necessary trading equipment, but it also charges you a commission for every trade you make.
When you day trade stocks, never risk money that you can't afford to lose or that has been set aside for another use. Most day traders suffer financial losses when they first begin trading.
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Comments
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Anonymous
Aug 07, 2011
While it's true that day traders buy stocks and hope they will go up, day traders also short stocks as well, hoping they will go down, therefore making a profit. Often short positions increase in value faster than long positions due to the psychology behind the trade. As far as risk -- day trading , if performed with proper position sizing and stop placement is considered by some to be less risky than buying and holding individual stocks. Many investors buy stocks with no stop loss order in place and only hope as a part of their trading plan that it will increase in value rather than drop to a very low percentage of the entry price. -
flgeezer
Jan 13, 2010
All good advice above - - - just add one more tool before you begin: get familiar with the E-Zone System. After you have screened and chosen a stock to trade, you need to know what its E-zones are. These are the Entry and the Exit Zones for the coming day. Published by 6:00 p.m. so you know where to place your order the next day. No sense buying if price is already in the Exit Zone, and no sense selling short if price is in the Entry Zone. Protect yourself - - - know those zones.
