For an investor good at day trading, the market is neither good nor bad. It is ideal, for the one who has the capacity to seize the correct timing to buy and sell. An imaginative day trader knows what happens when the market conditions are awful, like the current period of recession. But the good day trading tricks work well at all times.
A day trader needs to be well-versed in understanding the trends. A trend is a pattern that occurs in the share price over a period of time. Finding trend does not mean that one needs to look out for a share whose price steadily rises. It can mean both the rise and fall in prices. When you have located the trend, you have perhaps discovered a sound investment proposal. For example, the share price drops for three months and then rises for 2-3 days. It slowly falls for a few months to rise again! This is the information an imaginative day trader needs. He is able to judge the best time for investment.
A day trader should not prefer a share with low average trade volume. Those with high volume go with the trends and are a safe bet. One needs to avoid the following traps. Buying highly advertised shares, that are flashed on the message boards, tips from unreliable, spam e-mails; picking up shares at random and trading on them exhibiting the instincts of a gambler; holding on to losing positions with a fond hope that something miracle will happen. With this approach, the chances of small losses turning into larger losses are real.
A day trader ordinarily makes several trades in a day, buys and sells a number of shares. He is the one who tries to make profits by taking advantage of the small increase in share prices. He will not buy shares just because their prices are low.
Estimate well what is your liquidity as you enter the exchange with the idea of day trading. You should not do it with money that you can not afford to lose.
Have a definite strategy to buy and sell a share. You must have clear buy and sell signals.
You stand to gain only when you understand the best time to buy a certain share.
You need a constant remainder that emotion is bad. Every share is part of your trading discipline, and nothing else. Do not put blind faith on any technology and carried away by a story circulating in the market. Trade on the basis of solid facts and the conviction formed by your past experience!
Day trading is the most active and the most difficult form of trading from the point of view of risk. You need the investment tools like quotes and charts, real-time news on your tips. You also need to be the master of all types of strategies, to eke out profit from your trades. For the beginners, caution needs to be exercised at every step. To start with, concentrate on certain group of shares or an industry. The more you specialize, the better are the opportunities for profitable trades. Use trade systems with hot/short lists. This will enable you to find opportunities with speed and easiness for shares you are trading. Make changes and update the hot list and share groups at short intervals. When not sure about the market avoid the trades.
Your capital is precious and needs protection at all times and therefore do not waste it on uncertain positions; the market provides plenty of opportunities. Concentrate on one opportunity at a time. This approach reduces the trading risks and assists in maximizing opportunities by increasing position sizes. Exercise cautious control on the number/frequency of trades.