Have you ever tried trading in stocks? As you know, day traders can trade in various markets like the stock market, the Forex market, the crypto market, etc. Day traders mostly trade in stocks. In this post, we are going to discuss stock day trading. Do you know what stock day trading is? If you don’t, we are going to help you.
What is Stock Day Trading?
When day traders trade in the stock market, this is called stock day trading. If you buy and sell stocks daily in the stock market, you become a stocks day trader.
A stock market is a place where companies issue their shares to the public and raise money. These shares are then bought and sold on stock markets. As the value of shares keeps on changing, traders use this opportunity to trade successfully. You can buy shares of a company at a lesser price and then sell it when the price rises for the day.
Your chances of success depend upon various strategies you make. You have to buy and sell the stocks in a single day to be a day trader. If you want to start stock day trading, we can be your guide. In this post, we will introduce you to day trading in the stock market and guide you.
Why should you day trade stocks?
If you think stock trading is not for day traders, you are wrong. Here are a few reasons why you should day trade stocks.
- Easy: Because of the great web/mobile apps these days you can easily trade online from your desktop or phone.
- Liquidity: Stock market liquidity is increasing day by day. And when liquidity increases, you can easily speculate the changes.
- Speculation: With increasing liquidity and speculation, you can take advantage of the right time.
Day Trading Vs. Stock Trading
Here we are going to discuss the points of difference between day trading and stock trading. Before you start day trading, you need to decide if it is suitable for you.
- Flexibility: When you are day trading, you have to buy and sell stocks on the same day. Because of this, you have sped at least a few hours daily. You need to spend some time in the morning when the stock market opens to grab opportunities. But when you are stock trading, there is no fixed time limit for you to buy and sell stocks. You can buy stocks today and sell it after a few days, weeks, or months.
- Returns: In stock day trading, you might earn more returns. Because you are buying and selling in a single day, you can use leverage. Leverage helps day traders to make huge returns margins. But it is also possible to have huge losses.
- Exciting: In day trading, you can enjoy it because you have to transact daily. Long term stock trading can become boring, while day trading keeps you entertained.
- Daily opportunities: When you day trade, you can easily get new opportunities daily. The same is not the case with long term stock trading. The trading trends don’t change for a long period of time.
It is very important to choose a good trading platform in stock trading. Trading platforms offer you various advantages like,
- Advanced Charting
- Automated trading strategy
- Right market
Because of all these reasons, you have to choose a good trading platform. You have to choose your stock broker carefully. Each stockbroker or trading platforms have different advantages. Make sure it fits your trading style. Your stockbroker should always go hand in hand with your trading style.
How to Trade Stocks?
When you trade stocks daily, you take advantage of two factors. One factor is the price movements of the stock. And another factor is the high volume of shares being traded. You can take advantage of these two factors. Because of these factors, you can easily enter and exit the market. To know how to trade stocks, we need to understand these two factors i.e., volume and volatility.
Volume is the number of shares that are traded in the market. The shares have to be traded within a specific time. Every transaction adds to the volume. If 50 transactions were made that day, the volume would be 50.
Now how can you use volume to make the stock selection? Volume is an indicator. It indicates which shares have more weight. It also helps in speculation. Higher volume means the move is more important.
If you have money to invest, you need to check the stock options. Your broker will give you a daily performance list with good performing shares. You can use this information. You can also do your own research. If you see a particular share has been traded more than normal, you can invest your money there.
Volatility helps you to know the value of the stock changes drastically. Some shares are volatile, whereas some are less volatile. You can invest in high volatile stocks to take advantage of price fluctuations. Keep in mind that It’s very risky.
You can check the volatility of stocks by using the beta. It helps to know how volatile a particular stock is. It is done by predicting the price movements. A stock with 1.1 betas has moved 110% for every 100%. And a stock with beta seven has moved 70% for every 100%.
How to Find Stocks
- Large Volume: You can easily find stocks to day trade. Look for stocks with large volumes. You can also search for stocks with a recent rise in volume.
- Beta: You have to look for stocks with a beta of more than 1.0. These stocks have high volatility.
- Strategies: You can also use various other strategies to find stocks to trade on a daily basis.
- Defensive stocks: These stocks have lower volatility, but they can be in demand when there is market panic.
This is how you can find stocks for day trading. But you can’t always trust these factors. Sometimes the market can change because of several external factors. You need to study the market trends to know which stocks to day trade in.
How to know which stocks to trade today?
Now that you know how to use volume and volatility factors, you can easily find stocks. But to make a quick decision about which stocks to trade today, you can use an alternative.
- Risers and Faller’s table: this table helps you to know which shares are rising and falling. You can easily find which stocks to trade today here.
- Active shares table: Your broker will provide you this table. They will list all the active shares of the day. You can choose which share you want to trade-in.
Stocks: When to day trade?
Now that you know which shares to day trade, you need to know exactly when to trade them. In trading, timing is the key. If your timing is right, you will gain. If it is bad, you will lose. Therefore, it is very important to know when you should day trade.
- Start Early: If you want to take advantage of time, you need to start early. Wake up before the stock market opens. Do your research. Make plans and strategies. Start your desktop. Open the page and start tracking all the stocks. Wait for the right opportunity and make your move.
- Keep it short: Once you start doing some good trades, don’t become too greedy. Keep the trading short. You can buy and sell shares within a few hours and be done with it. You can easily do some good trades in a few hours, rather than wasting your time all day. Keep it short and simple.
Stock Day Trading Tools:
You know how to trade, what to trade, and when to trade. But for better understanding and practical knowledge, there are various tools. These tools will help to understand the stock market from a day trader’s perspective.
Education never stops. You can easily educate yourself about stock day trading techniques using various tools. Here is a list of tools to educate you.
Blogs and Forums
You can check various trading blogs and forums to get the latest gossip about stocks trading. Sometimes experienced traders share their knowledge and experience through forum.
There are many online and offline trading courses. Enrol in any such course and know the techniques of stock day trading . You can also learn market analysis. You will know how to avoid common trading mistakes.
Tutorials can be in the form of video or PDF documents. These tutorials will teach you how to use various software in trading. You can easily set-up and use this software to make trading easy for you. These tutorials will help in the selection of stocks.
Online newsletters pick out various stocks for you. These stocks are selected through a series of scanning and analysis. You can check the stock charts to know which stocks are good for you.
Stock websites give recommendations about stocks. You can check these websites to know which experts recommend stocks.
Although nobody reads books these days, they can be quite resourceful. You can get through knowledge from these books. You can learn how to identify and classify stocks. All you need to do is find the right book. Some books can do wonders for your day trading skills.
Another important tool to understand practical day trading is a demo account. It is like a simulator. In this, you need to day trade in stocks using virtual money. A real stock market situation is created. You have to buy and sell stocks on the same day to make a profit. With is you can learn from practical experience.
You’ll be able to analyse various stock trends and behavior easily. You can make strategies and speculate on stock prices. You can also learn how to predict the future price and you will learn from your mistakes. If you spend a considerable amount of time trading with a demo account, you can become a professional day trader in no time.
A demo account is specially designed for beginners. If you are a new player in day trading, you can learn quickly from demo trading. And once you are ready, you can try your hand in actual day trading in stocks.
Now that you know everything about day trading in the stock market, you can use this knowledge practically. If you are a day trader, you have many options. You can trade in various markets like the stock market, forex market, cryptocurrency market, etc. Among all these markets, the most straight forward option for you is stock trading.
Stock trading can be long-term or short-term. But if you are a day trader, you have to trade in stocks on a daily basis. So if you buy a stock in the morning, you need to sell it before the day ends. . Keep in mind that there is always a risk of losing money as well. You can predict small price movements and use leverage to make a an interesting trade.