If your new to the Day trading business, let me be the first to welcome you to this complex and intricate world. Because this is a 101 course(beginners) article, I will not go into any in depth detail about certain subjects. This article is strictly for introduction purposes only. Let me start off by giving you some background information on investing and investments.
Investing has two separate meaning depending which field of business(Economic or Finance) your are interested in. In a more general sense investing is related to saving and is used in everything from business management to household expenses. Lets start with Finance Investing and work our way to Economic.
Money is always a touchy subject so I will do my best to make this as painless as possible. In Finance its is a commiment or lending into a centralized ,secured institution. Investments are usually made through banks, credit unions, lenders, brokers as well as insurance companies.
In an economic sense investing is the amount purchased per unit of time on any good(service). They are not consumed immediately, but saved for later on.
Now that you have been briefed on some basics, lets move onto the good stuff.
This particular type of trading refers to the practice of buying and selling(stocks and bonds..etc) within the same day before the market close for the trading day.
Different Types of Trading
Trend Following- the belief that stocks that rise will continue in that fashion and the same for falling stocks. The buyer can buy into one that is rising, or short sell one that is falling. Just because something trends in a certain direction does not mean it will be consistent.
Scalping- also known as spread trading involves establishing and liquidating(turning into cash) a position very quickly(within minutes or even seconds).
Price Action- Simplicity in an complex world. There are certain traders who prefer to keep their trading simple by relying on technical analysis as well as price movement, volume, and other raw market data. The benefit of this is it simple, than down side is the amount of experience and background knowledge of how markets work.
Contrarian(reverse of Trend following)- the belief that rising stocks will eventually begin to fall after a some time has passed and the opposite is true.
Profits and Risks
The nature of this type of trading is highly(and I mean highly) volatile. It can either be extremely profitable or extremely damaging. You could think of this as high-stakes gambling(and you just put one-hundred thousand dollars down on red). Buying on margin- Using borrowed funds increases the riskiness of the trade.
I personally do not have the knowledge nor the attention span to be a high risk trader, but if you love risk(and risking other people’s money) this could be the job for you. In the end though is not all life, but a gamble. “Hey you win some, you lose some, but you live, you live to fight another day.”-John Witherspoon