Trading, is about finding good buying and selling opportunities on the financial market. For a trading to be successful, it is important to buy a financial instrument when it is cheap and sell when it is expensive. It sounds simple, but because of the value of stocks, commodities and currencies increases and decreases constantly, it can be difficult to pinpoint the right time for trading.
Some argue that trading is pure speculation, while people in the financial world believe that a prerequisite for trading to be successful is knowledge of how the various financial markets work. The more knowledge, the wiser decisions and greater gains.
In the financial sphere, the customer can buy securities in either the long or short term. A Day Trader enters the market and lays a position and has it only for a short time which can consist of seconds, minutes or at most a few hours, but never overnight, and then sells it. The difference between the purchase value and the sale value will be either a profit or a loss depending on whether the price has gone up or down and on whether the trader has had a short or a long position.
A Day Trader aims to make a profit through the financial instrument's value changes during the time the position is owned. This can be perceived stressful and therefore it is important to restrain your emotions and not panic. The value can go up and down at a fast pace and it is important to have a plan in advance to relate to.
The first thing a day trader should do is choose which market the investments should be made in. Below are some popular markets and which you can read more if you click on the links.
Many new traders often start trading stocks as there is a large supply of them. When trading in stocks, the trader follows the change in value of an individual selected share.
Index trading is common in day trading and the trader invests in the development of an entire group of stocks instead of one company. Let's take an example. OMX30 is an index of the Stockholm Stock Exchange's thirty most traded shares. In index trading, the trader invests in the entire overall price development, not in the value development of an individual share.
Different types of CFDs are common choices among day traders who can invest in both ups and downs of the price. The traders do not have to do paperwork because the underlying asset is not owned by the trader instead the CFD trading is speculation of the price development.
Trading in commodities is probably what people have bought and sold the longest time in human history. This market trades in metals like gold and silver, agricultural products like wheat, sugar and coffee, energy products like oil and gas, just to name a few.
Currency trading has long been a popular choice among day traders as there are many currency pairs to choose from. Every time you buy a currency, you sell another currency at the same time. The foreign exchange market is the most traded market of all and generates several trillion dollars daily.
Various cryptocurrencies have become increasingly popular in day trading as more digital currencies have been launched. Keep in mind that value can fluctuate sharply as many people use it in speculative investments.
Successful trading requires a well-thought-out strategy. There are many strategies to choose from and below are briefly presented three trading strategies that are popular among day traders.
Trend trading follows market movements. If a price is on the uptrend, the trader takes a long position and when the price is on the downtrend, the trader takes a short position. The position is held only during the time the trend continues.
In swing trading, the trader follows the value development in both ups and downs for a short time and when the instrument has reached the desired position, the trader goes out. During swing trading, there can be many ups and downs before the sale is completed.
Scalping is a strategy where the trader strives to make many small gains in a price development of one and same object. The trader buys and sells everything as the price goes up and down. They always have to buy when it goes down and sell when it has risen a bit and then wait for the next falling trend and buy there and sell off when it has risen again. In this way, the trader makes many small gains by following one and the same object for a limited time. For the trader, it requires hard control and going out before it is too late.
If you have both interest and time, you have the basics to succeed. There is no official training you can take to become a day trader, but it is important to prepare as much as possible on your own. The online brokers have good free teaching materials, articles and analyses that customers can take part in and good customer support that can give you advice. Remember that a trader has to keep himself á jour all the time because the market is in constant motion.The following ten points may be of help before you decide to become a trader.