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Thursday, October 30, 2014

Trouble-free ways to succeed with intraday trading

Day trading tips
Numerous capital markets allow day trading activites
By Jake Hyet

Intraday trading, or day trading, is considered to be the most popular method of electronic trading and can furnish solid returns to individuals who are willing to take the time and have the patience to learn the system. 

A word of caution here, like anything to do with the stock market, it can make you a lot of money, but there is also the potential for big loss, so just be careful not to use money you can't afford to lose. Here's some trouble-free ways to succeed on intraday trading: 

Pick a market

Choosing only one market or at the most two in which to concentrate your efforts will help increase your chances for success. By doing this you will be able to gain the most knowledge and experience you can in that particular market.

Trading on stock and security markets  

Concerning trading on the stock and security markets where the trades are constant, but also continually changing. Day trading is designed to provide traders with the opportunity to buy and sell financial assets in short periods of time while always having the goal of selling at a higher price than the price they purchased them at.

It is, however, important to know how the system works and to learn the tools and tricks ingrained in it before you enter day trading. One point, a day trader must have a minimum equity level which is money that is deposited into the platform within which the trading is handled. Also, don't forget that you don't have to go it alone. You can always opt for investment management services.
Use money to control risk

This money is used to control the risk (in form of buys) that a trader can take. A trader is permitted to hold stock worth four times the value of his equity during the day when trading is going on. However, the trader may only hold twice the amount of his equity in stocks after the end of the day's trades. Since the stocks that are typically invested in by day traders are fast moving stocks, the bottleneck is handled without difficulty.

Proven strategies for day trading

Trend following -- It involves watching the trend that a particular stock is taking to predict the profitability in trading in it. Purchasing a stock when its price is on its way up and selling it sometime later at a profit is an example of this.

Scalping -- This strategy depends on small profits which are generated when selling a stock that has minimally increased in value. It focuses on capitalizing on small profits over many stocks to compound into larger profits. 

Range trading -- Some stock prices are seen to move up and down in a wave like manner. The strategy emphasizes on speculating on the prices that form the peaks of the wave and capitalizing on them by buying when the prices are lowest and selling when they are highest. This is more of a job for an investment management firm though, as is the method below.

Use of artificial intelligence -- This method consists of using software programs that parse through real time market data and according to the conditions that you assign to it, the software makes real time fast trades. This strategy capitalizes on algorithms that define which trades to do and when to do them.

Use strategies together

The strategies are never used solo because the market trends are not accurately predictable and they necessitate that the trader evaluate and revaluate their position for maximum profits. Discipline is important to day traders, meaning that they adhere to their self-set rules regarding their trade activities.

One common rule is the three E's. Entry, exit and escape. Entry is the maximum price at which to buy a stock. Exit is the profit which a sot k generates at which the stock is sold. Escape is the loss in value of a stock at which the stock is sold to prevent more losses.

Day trading is not a get rich quick plan, but with analytically sound judgment, patience and continuing practice, you can earn a good deal of money. One trade, one day at a time.

About the author: Jake Hyet is considered an expert on intraday trading and investment management having worked in both fields for a decade. He writes extensively on the stock market.

Image: Luis Villa Del Campo, "Nasdaq Market site TV studio"; CC BY-SA 3.0