Day Trading Tips and Strategies
Day trading is the process of buying and selling financial intruments with the intention of selling at a higher price than you purchased on the same day. Futures, currencies and options can also be day-traded. As the term implies, pure day trading most often involves the sale of the purchased security by the time of the market close that same day. Day trading is highly risky yet can be very profitable. Following some basic strategic guidelines will increase your chances for success.
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The Right Brokerage
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Since today's exchanges are electronic, people can day-trade on the Internet from anywhere. You will need your own brokerage account with good real-time data and low per trade pricing. Some well-known brokerages that have day-trading clients include Scottrade and TD Ameritrade. Make sure to choose a brokerage that offers flat rates and no maintenance fees, as well as a guarantee on trade execution time.
Make sure your brokerage offers not only streaming real-time data but also software that provides patterns for strategic day-trading maneuvers. A trade based on market patterns might last a few seconds or more than six hours, with most trades lasting only a few minutes.
Patience is a Virtue
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Never make a trade just for the sake of it or because you are bored. Being patient is critical to your success; otherwise, you will find yourself making a trade that's not strategic and chances are it will be a losing bet. Avoid what's known in the day-trading world as the "herd mentality." Learn to trust your skills and judgment, and be decisive when instinct tells you to make a trade. Not panicking can mean the difference between a profit and a loss. Avoid panic-buying at prices that are almost sure to be more favorable just minutes later. Remember that often it's the erratic moves of amateurs behind volatile price fluctuation.
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Playing the Open
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One strategy is to purchase a stock that has announced good news in the morning at or even before the market opens. Even if it's already bidding up in price, most stocks with good news will rise as the day wears on. Another variation of that strategy involves waiting until roughly 20 minutes past the market open before purchasing. Typically, the price of a stock will dip a bit around then before resuming its climb. Again, the key to such a day-trading maneuver is patience and avoiding panic-buying.
Instant Research
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Being patient does not need to mean being idle. Join a traders' club or chat room that shares best practices and sensible trading tips. Good day traders also review all of the market news each day, both before the bell and after the market's close. One reliable website where you will find breaking news for individual securities and the overall market is Marketwatch.com.
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