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Day traders can be accurately described a professional speculators in securities, according to Investopedia. Within the span of a single trading day, day traders can buy and sell a wide range of financial assets. Whatever the security that a day trader speculates in may be, all positions are closed before the duration of the market shuts down for the day. The securities that day traders speculate in are diverse, including but not limited to:
- Stocks
- Titles of ownership
- National currences
- Mutual funds
As a trading style, day trading may be held as a focused specialty for some day traders and a constitutive component of broader trading strategies for others. It isn’t uncommon for certain traders to engage both in regular day trading and extended buy and hold campaigns as well.
The Fundamentals Of Day Trading
In order to carry out their trades, day traders make use of specialized software solutions. The software solutions that day traders use are most effective with a high-quality Internet connection that fully synchronizes it with the market. Any delays in a trading software’s online connection could create a lag that prevents opening a well-informed position. Depending on their preferences, a day trader may either use a software that they own the rights to independently or work with a third-party brokerage that provides a software package for them.
Whether a day trader decides to work with a brokerage or use their own software, it is common for traders to use more than just one monitor to observe all important market metrics. While it isn’t necessary to have more than a few technical indicators to open and close a well-informed position, the highest level of accuracy will be most achievable with multiple monitors to provide a panoptic view of all indicators at once.
Technical Knowledge And Starting Capital
Conducting successful day trades demands a solid foundation of knowledge about the nature of the market, how it moves and the implications of its movement patterns. Day traders need to understand how factors like holidays, news announcements and economic trends can impact the market and change the outlook for the positions they consider.
In addition to what they know about the nature of the market, day traders also need to have a strong base of knowledge about the distinct ways that different securities are traded by nature. Trades of futures, mutual funds, stocks and other securities can have a wide range of different effects on trading capital due to their unique margin requirements.
Even with a strong base of knowledge about the nature of the market, it’s equally important for traders to have enough capital to leverage the market’s fundamental unpredictability. No position that day trader opens is ever guaranteed to close successfully, meaning that not even the most experienced day traders can expected to have a completely loss-free record. Though there is no concrete amount of capital that guarantees a day traders will start off with the best chance of succeeding, many serious traders save up for an initial investment of at least five figures to fund their accounts.
Conclusion
While it isn’t necessary to hold an formal certifications or employment positions to speculate in securities, online day trading has become far more challenging than it was during its initial rise to prominence in the late 90s. Since the tech bubble deflation that occured shortly after the turn of the millennium, the entry barrier for day trading has increased by virtue of the skill and knowledge required to manage its unpredictable nature.
Related Resource: 5 Things Every Financial Advisor Should Know About Stocks and Bonds
To manage the difficulty of maintaining a profitable trading portfolio, day traders are constantly researching and leveraging new technical solutions to gain the clearest window of insight into the market.
