Day trading is a type of forex trading that involves buying and selling currencies at the same time and on the same day. The trading takes place during US hours, so that users can follow the movement of the market and make informed decisions. While there is no exact number available, it is estimated that there are around 500,000 US day traders, generating around $16 billion per year in revenue. The popularity of day trading among investors has resulted in a surge in the number of online platforms offering this service, with more and more people looking to take advantage of this lucrative market.
If you’re looking to enter the world of day trading, then you’ve come to the right place. Here, we’ll cover everything you need to know about making money as a day trader, including the instruments that you can use, how much money you’ll need and much more.
Instruments For Day Trading
The most popular choices among day traders are generally the equities, such as the S&P 500 or the Dow Jones Industrial Average, because these instruments are relatively easy to understand and quick to place orders on. For example, the S&P 500 typically falls between −20% and +20% a day, while the DJIA fluctuates between −5% and +5%.
Because these securities are already publicly available, there’s no need to purchase them from a third party. Additionally, the low volume that characterizes most retail transactions in the markets minimizes the opportunities for price manipulation, reducing the chances of getting cheated.
The Growth Of Online Day Trading
The emergence of online trading platforms and the spread of the internet have undoubtedly contributed to the growth in popularity of day trading. The convenience of being able to execute trades from anywhere at any time has resonated with investors, especially as automated platforms and algos (systems) have made entering and exiting positions easier and less risky. Additionally, the cost of transmission and dissemination of market information has declined, making it cheaper for participants to get the latest market data and news.
The popularity of online day trading has led to the development of several applications and platforms that cater to the needs of this market. These solutions allow users to trade with the leverage of a bank without having to worry about the liquidity of the underlying instrument or the safety of their capital. Examples of popular online day trading platforms include cTrader, MetaTrader 4, Plus500 and XBT Provider.
How Much Money Will You Need To Day Trade
A key consideration when entering the world of day trading is how much money you’ll need to be financially secure. You’ll need to determine how much you can afford to lose, setting a risk limit that will help you keep your cool in the face of unexpected volatility. It’s not advisable to put too much money in a single investment, especially if you’re new to this type of trading. Start small and build your way up.
The amount of money you’ll need will depend on several factors, including:
- Your goal or purpose for day trading
- The frequency and size of your actual trades
- The amount of risk you’re willing to take
- Your time horizon
- How much you need to spend on market data, etc.
It is generally accepted that a $25,000 investment in the stock market, with acceptable risk, should be sufficient to give a trader a good start in the world of day trading. Of course, this is dependent on the level of expertise that you can attain.
The Experience Of Day Trading
Another important factor to consider when entering the world of day trading is the experience of the trader himself. To create a good first impression, it is advisable to take a course or two, preferably with a professional coach. This will enable you to learn the ropes and get familiar with the terminology and habits of successful day traders. Additionally, by joining a group of experienced traders on Twitter, you’ll be able to learn from the best and get useful tips on how to improve your game.
Once you’re confident that you’ve built up a good enough knowledge base, you can begin applying what you’ve learned to practice trading or sandbox trading. Practice trading is when you use real money to simulate buying and selling securities, testing out different scenarios and seeing how your orders are executed by a trader bot. Sandbox trading is similar to practice trading, except that it is restricted to demo accounts, which do not have real financial assets involved. Demo accounts are ideal for getting started in the world of day trading, allowing you to test out different strategies and watch how the instruments behave in a realistic environment.
The Opportunities For Growth
Day trading is a fairly new concept, so there aren’t many established guidelines for successful trading. That being said, there are a number of promising investment opportunities that can be pursued by individuals interested in this form of trading. For example, MarketCloud provides crypto-to-fiat market data and analytics to traders and institutions, allowing them to monitor and analyze the price movements of thousands of unique digital assets.
The company’s MarketScore tool enables users to predict the likelihood of an emerging trend, measuring the sentiment of the market and assigning a score between 1 and 100 to each cryptocurrency, helping the user determine the most profitable time to enter or exit a position. MarketScore also provides the user with relevant news articles, helping them stay abreast of the latest developments in the crypto space.
Another exciting emerging opportunity is Razer Cortex, which aims to connect cryptocurrency holders with providers of luxury goods, giving the average person access to luxury items, such as clothing and accessories, that he or she could not normally afford. Because the items in the catalog are highly customized and unique, these luxury goods are typically only available for a limited time or until sold out. This makes them ideal for day trading.
The Differences Between Traditional And Online Day Trading
Many people get confused when it comes to trading and investing, not being sure whether to approach their financial needs differently. The truth is that there are only a few significant differences between traditional and online day trading. Here, we’ll highlight a few of the significant differences, along with the pros and cons of each choice.
The first significant difference between traditional and online day trading is the time horizon. Traditionally, a day trader has a time horizon of less than a day, selling and buying as the market changes during that time. In contrast, an online day trader will have a time horizon of several days or weeks, seeing the market as it changes over time.
The second significant difference between traditional and online day trading is the speed of the markets. Because the markets fluctuate so quickly in the case of a traditional trader, there is generally less opportunity for the individual to make huge profits. Online day traders can take advantage of the speed of the markets to make large profits. This is made possible by placing orders in advance, limiting the risk of getting caught out by the market. The third significant difference between traditional and online day trading is leverage. Leverage allows a trader to make much larger profits than would be possible without it. However, leverage comes with a price – if your leverage is $100,000 and you make a $20,000 profit on one trade, you’ll end up with a $120,000 credit on your account. This means you’ll need to manage your risk much more carefully in order to keep your capital intact.
The main benefit of a traditional approach to trading is the amount of time it takes to get the training and knowledge necessary to become a successful day trader. An investor looking to get into the world of day trading would be best served by taking the time to learn how to become a successful trader, rather than focusing on simply getting in the market and out again as quickly as possible. This approach will almost certainly lead to greater and more sustainable profits.