One thing you quickly learn as a day trader is that the only constant is change! As they say “The trend is your best friend”. Which is true because for a day trader it doesn’t matter which way the stock goes, up or down as long as there is a trend. A wise thing to do is to follow the trends. When a stock rises it’s wise to buy, what we call going long or buying a long position. When the stock goes down you’re going short. Both ways you make money, so it’s always a good idea to follow the trend. Some traders go against the trend, this can be profitable but only if you have a strong indication the trend is going to turn in around. When starting at day trading it’s best to follow the other traders and slowly learn and get the hang of it.
Passive trading versus active trading
In the world of trading ther is a difference between active trading and passive trading. Active trading is referred to day trading and passive trading is when a broker buys stock, options, forex etc. and keeps them until the value rises or cashes in on the dividend. This way of passive trading can be weeks or even years before the broker decides to sell.
Day trading or active trading is very different, a day trader buys stock to gain profit from short term fluctuations. In this way of trading it doesn’t matter if the stock goes op or down, a broker buys a long position or sells short position. This may vary from seconds up to a couple of days. A day trader is considered a active trader, the other form is passive trading. Passive trading is in most cases better for a starting trader because there is more time to study ,research and more time to evaluate the trade. Day trading is so fast that you have to know what you’re doing, you have to have a plan of action.
A plan of action or businessplan is also called a trading plan. A trading plan consists of all the factors that can determinde the trade, like exit signals, goals, stop-losses, entry signals, drawdown analysis. The plan has to have a clear strategie. The strategy has to be tested first with historical data which is called backtesting and then tested in simulator mode which is referred as forward testing.
The next step is to open a account and staring with a small amount of money to put your strategy into action. A successful day trader keeps testing his trading plan evaluates and adjusts when necessary. Profits and risks You can make a nice profit from day trading if you know what your doing. On the other hand you can lose a lot of money very fast if you don’t have a solid trading plan. A loss in day trading is called a drawdown.
VIDEO live day trade
If you want to see a day trader, check out this video of a live trade from Youtube user ClayTrader.
Good website for strating at daytrading
More info on daytrading Wikipedia Day trading