Day trading can be a bit of a gamble and traders remain divided on the issue on whether or not this serves much purpose to the stock exchange industry.
Still, what most people could agree on is the fact that day trading is certainly not for everyone, and that it can involve huge risks. So, before you immerse yourself in day trading, be sure that you get your facts straightened out.
What Is Day Trading?
Day trading is the buying and selling of securities for a certain stock within a single day. The main goal of those who practice this type of trade is basically to be able to profit from the difference between prices for buying and selling.
This type of trading serves two very critical functions in the industry. First, it keeps the markets efficiently running because of arbitrage as stock exchange basically thrives on buy and sell activities. Another function for this is that it usually provides so much liquidity in the stock market.
What Makes Day Trading Risky?
Although day trading may sound quite appealing at first, be warned that up to this day, the profit potential of this type of trading is still under debate among investors and brokers. And if you are new to the trading game, it is not advisable for you to gamble your investment as you may end up losing substantial amounts of money.
Although it is not necessarily illegal nor is it unethical, most would agree that it is risky because principles of this trade are based on the fast and easy money, mentality, and therefore, day traders rely on making profit by rapidly buying and selling stocks in a single day as their stocks continue to rise and fall in value.
Of course, the chances relied upon are not quite dependable and choosing to do business this way seems more of a gamble than a sure way to gain money. Most financial advisors may discourage people from entering this type of trading, with the argument that most of the time, rewards do not justify the risks involved. The same is true with picking penny stocks.
Apart from this, many parties capitalize on much of the confusion behind the controversies on stock market trading and create multiple Internet scams. Since most investors in these type of trades do not actually have a lot of money and may use borrowed money (margin) to buy stocks, this can be very dangerous.
The bottom line is, most financial experts would argue that most successful companies have grown not because of daily trading, but through more traditional means of long term growth.
If you were currently not very familiar with the stock market game, then it would be wise for you to stay away from trading on a daily basis. Take in mind that the best way to earn profit may be through the long process and hard work. Remember taking shortcuts may certainly involve much more risks than you may want to bargain with.
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In this chart with $PSTG, I look at the RSI to see that it is under 50 in the oversold category and climbing back up. I see a gap down that will be filled back in eventually, I also see a double bottom in the month of May that will pose as a support. The stock is below both the 50 MA and 200 MA with potential to the upside. The bottom chart shows the MACD is crossing and sellers are beginning to fail or stop selling. Looking a trends this stock should rebound to close the gap back to the 200 MA within the next 3 months as long as the market is stable and no bad news some out.
Now a few months later in July, had you followed what I saw and read to you based from the chart above and put in for 100 shares at $23.11 for a total of $2,311 investment, as noted in the chart above. You would have sit on that investment until the movement came that was being predicted. Now, this prediction was based upon many moving parts that is taught in many of the products that is shared throughout this site. This prediction gives you a high chance of success based upon technical analysis and fundamentals of the company.
As you can see, in July the stock has risen well above the 50 MA and the 200 MA, with a RSI above 50, and the MACD on the way back down. The stock has reached a resistance point and has closed the gap that was from March. If you closed your position in July, maybe July 21st you would have closed the position at $37.07 a share at 100 shares for a total of: $3,707. Now take $3,707 – $2,311 = +$1,396 increase in your bottom line. What if you had invested 1,000 shares, or $10,000 shares your bottom line would have increased even more to $23,110 or $231,100.
Now do you want to learn how to read these charts, find your trades be it long or short? Join in the Wealth Squad using the links provided: https://launchpass.com/thewealthsquad/member/v2?via=Stockmags and get started. You will get access to multiple training sessions, and active traders that will show you what they are trading, why they are trading it, and they explain the how behind it. You trade on your own, practice with paper trades first to get well at it, learn how to find trades, and then execute them. Just like practicing in the gym you will flex your trading muscles just as I have shared with you above.
Track Your Trades
If you want to become consistent in your trading or investing you should always track your trades. You need to document your trading psychology along with what is happening with the stock when you trade it. As you keep track of this information you will begin to see patterns that get your attention and will show you more insight into your personal psychology nuances that you may or may not know about. It is always wise to stay on top of what is happening within your trading and improve your trades the with a tracker.
What’s a good way to track your trades? I use an electronic journal that I can make multiple copies of to see what is going on within my psychology of trading. Here is the link to my trading journal that I use.
Want To Have a Guide To Trade With You?
Ok, so many people want to be taught how to trade stocks. However, there are so many different products out there that teach multiple ways to trade stocks. The way we trade stocks is to buy and hold for a certain period of time, generally until either our profit targets that we determine are met or if our mental stop loss is triggered and met. We research a certain group of stocks that fit the parameters and then we add them to a watchlist. From this watchlist, we will buy into the stock via shares or options, whatever we feel like at the time and we use patience to take the stock to the profit target or get out if it reaches out max target stop loss. This is a basic overview of what we do. If you want to learn more please consider joining us for as long as you need to learn the basics and become a Jedi Master of your trades. Join the Wealth Squad to start your journey to building wealth through the stock market and various real estate and business adventures.