Day trading is the buying and selling of a stock in a short period of time. Day traders will hold a position for as short as a minute, or as long as an hour. Day traders will never hold a position overnight, hence the name. Day traders intend to sell their positions for just a few pennies more than what they bought them for. This requires day traders to “flip” positions several times a day.
The quick trade nature of day trading creates high commission costs for day traders. Commission costs can run as high as $100,000 in a single year. Day trading also carries a higher degree of risk than other types of investing. The combination of high commission costs and risks has prompted the National Association of Securities Dealers (NASD) to set forth guidelines as to who can participate in day trading. Before being allowed to day trade, a person must have their account approved for day trading by their brokerage house.
Day Trading Stock Picks
Day trading requires the use of short term indicators. Short term indicators will help a trader identify and anticipate short term fluctuations in a stock’s price. Stochastics are a common tool used for identifying short term moves. A stochastic is a complicated computer model which can indicate when a stock’s price is about to change direction. Stochastics are not foolproof and can often flash false signals.
The thing with day trading is you must be able to make a decision fast. If you sit there and think about it, you will likely miss the move. To be successful, you must act first and think second. Expect to make mistakes and lose money, especially when you are a beginner. For those who are inexperienced with day trading, I highly recommend subscribing to an online day trading service. Many of these services are operated by experienced day traders who offer their day trading programs for a fee.