What is Day Trading? Things you should know before you start Day Trading

Day trading is the new hype in the finance markets. Investopedia defines it as the process of buying and selling of a security in one day.

It is mostly common in stock markets and foreign exchange economy markets. The concept behind it is that a trader ends the day with no open position. This means that a trader averts the risk of holding onto a potentially risky position.

This is to prevent the scenario that if the market turns against them, they lose a lot of money. This can be a very good way to make money especially if you know what you are doing and are disciplined in the trade. Here is what you need to know.

Most of the people who excel in day trading are usually professionals. While it is possible to make money as an amateur, the odds are like those of a high stakes gambler. This is because to be able to succeed you need to know the market really well.

In addition, these professionals invest with a lot of money which they are ready to lose should the market work against them. While it may seem strange to invest with a lot of money, the concept is that more money allows traders to capitalize on small price movements, which when they add up, result in higher profits. This is referred to as the high-risk/high-reward strategy.

Day traders are divided into two types, professional and individual traders. Professional traders work for large financial institutions, while individual traders work for themselves. Individual day traders may find that they need large amounts to invest to be able to make gains in small price movements.

This is because when you invest little amounts, you will not even be able cover trading commissions because you will only be making minuscule gains. It is advisable to try out fictional trading to be able to develop the techniques that will enable you learn how to trade in this market.