By Mansi Gupta
A means to survive, an avenue to progress and vista to exchangethoughts, ideas and feelings... 'Trading' is perhaps as old ashuman existence on earth. It all began when the primeval manbegan swapping small useful items with each other in order tolive and fulfill many of his needs. The time that followed saw apersistence and enhancement of this tradition. The current worldruns on trading. It is a means to fetch bread and butter to manywhile for a large number of people trading business serves astoppings on a well-made cake. Trading therefore preserves anunparalleled significance across the globe. This article willeducate you about the various types and means of day trading,key terms and issues associated with it along with theirbenefits and shortcomings.
Types of Day Trading- depending on the time period for whichthe day trader retains the stocks with him or under his custody,different types of trading are classified.
* Basic Day Trading- Day trader commences the day by collectingstocks keeps them for sometime and endeavors his best to sellall of them at the end of the day. His primary work constitutesthe sale and purchase of stocks. These transactions enable himto bag good short-term profits and mitigate the risk of sale ofstocks in a fluster due to fluctuating price.
* Swing Day Trading- the day trader preserves the stocks forrelatively longer period of time such as for few hours and fewdays to accrue big profits. But swing trading runs the risk ofunstable market prices of the stocks.
* Position Trading- as the name suggests, the trader purchasesthe stocks and arrange the sales keeping in mind the position orthe market value of the stocks. This may entail keeping thestocks for few weeks and even months, but good returns usuallyfollow.
* Online trading- can be of any of the three aforementionedtypes but the sale and purchase of stocks is done via theInternet. Since this trading is through the medium of computer,an efficient computer with a 24-hour Internet connection is anessential requirement.
Issues behind S & P- When it comes to day trading, it is foundthat some particular stocks are good or beneficial than others.Primarily there are three factors that govern the sale andpurchase of stocks-
1. Liquidity of the stock- Liquidity designates the amount ofbuyers and sellers for the stocks concerned. Liquidity of thestock is deemed to be directly proportional to profits ensued byit. Greater the liquidity of the stocks, higher is the comfortin vending them. But the liquidity value is never stagnant. Ittoo depends on certain factors such number of share holders,outstanding shares, volume of transactions made and the numberof market makers.
2. Volume- contributes to the liquidity factor. It can beconveniently evaluated. For instance a day trader's stock shouldtrade a minimum of 500000 shares each day.
3. Volatility- stands for the ups and downs the stockexperiences everyday. If the volatility is less or negligiblethen the stock does not undergo any fluctuations and is thusrendered bad for day trading. It is believed that stocks thatare considered good go through at least a $2.00 variation perday of normal trading. 4. Price Transparency- is the term coinedfor the market depth and the potential of the trader to acquireknowledge about the order of the stock.
General Tips for successful day trading- * Study the marketcarefully before proceeding with purchase of stocks. The marketindicators displayed on television and announced on radio arethe best means to know about the market trend for the day.
* Do not be motivated by profits always. Every transaction maynot translate into profits. Adopt a strategy and stick to it.Don't flip your technique of working frequently.
* Be resolute and patient. If you are unable to incurspontaneous gains, profits may occur eventually.
* Never forget that day trading is a risky business and wherethere are profits there are losses too.
Article Source: www.ArticlesBase.com
