First, let us define day trading. Day trading is buying and selling of securities or stocks in a single trading day. Day trading can be practiced in any stock market place, but is most commonly seen in the foreign-exchange (FOREX) market. A day trader is an investor who makes a short-term investment based on speculation. A day trader chooses stocks based on market momentum. Typically, day traders are well-educated about the stock market basics and have good amount of capital to be invested. They utilize short-term trading strategies to gain of highly liquid stocks. Day traders bring efficiency into the stock market to keep them up and running and provide markets liquidity.

Many argue that day trading carries with it a huge amount of risk and the profits made out of day trading is not comparable to the risks associated with it. Despite the controversies associated with it, day trading can be done successfully based on a few factors:

Knowledge of the Money Market

It is very important to have a good knowledge of the stock market in order to be successful with short-term day trading. Individuals who attempt trade without a good understanding of the basics can lose huge amounts.

Good Amount of Capital to Invest

It is important to day trade with good amount of capital as it involves capital risk. A large amount of capital helps to capitalize on intra-day price movements.

Good Strategy to Win

A day trader needs to employ a good strategy in order to be successful. It can be a high-risk, high-gain strategy like swing trading or medium-risk, high-gain strategy like investing at the time of mergers. Investors can also keep the following in mind during day trading.

i) An investor needs to determine the major trend of the day. When the market is on uptrend, only buy-side trades can be entered, and vice versa. This trend is generally established during the first part of a trading day.
ii) An investor also must know the short-term trend of the market within the major trend of the day. This determines the market corrections that need to be made while day trading.
iii) It is also very useful to determine the entry and exit points in the market using various day trading indicators.

Access to News Source and Analytical Software

Information about the money market is an important prerequisite to successful day trading. Access to news channel and websites that keep an investor updated on the important stories in the stock market is very useful to day traders. There are also various kinds of software that indicate the swings in the market and an important tool for day traders.

Discipline

The price of a volatile stock can fluctuate quickly. Therefore, it is important to be disciplined and stick to the trading plan for a day trader. Hence, it makes no sense to trade for the sake of trading. If there is no good trading opportunity, it is prudent for an investor to stay out of the market.

Keeping Emotions in Check

Last, it is important for a day trader not be ruled by emotions during trading.
If all these can be kept in mind, a day trader can meet with success against the criticisms.

Author: Vijay Kumar Sharma
Article Source: EzineArticles.com
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