Day trading is an important element of online trading. Unlike people who invest in shares to increase their asset value and earn dividends, day traders attempt to earn profits every day. Day trading involves purchase and sales of shares several times by day traders in a day. The rule is to exploit different factors of the stock market for profit and exit the market before the day's closing.
Day traders employ different strategies. In fact, several online day traders have their own strategies. These strategies are classified into different groups. We will discuss some winning strategies in the following paragraphs.
If you are willing to get into day trade, you should find highly volatile stock. The more volatile a stock is, the more the movements it has: sale and purchase. If a particular is traded more, it offers better chance of making profits as its value fluctuates rapidly.
You should be able to identify when to enter the online day trading market and when to exit. In other words, you need to know the stock position at any given point of time during the trade. This knowledge can be obtained from the stock exchange upon payment of a nominal fee. Together with a software which accepts the real time feed, you will be able to identify when to purchase shares. You can keep a watch on stock fluctuation and exit as soon as its value reaches a preset value.
Talking about preset values, you should also plan for the percentage of profit and loss which you can handle. Ideally, you set profit level three times higher than the amount you can risk. Entry can be better defined if you set more than one condition. You enter the market only if all the conditions are met. Similarly, you need to identify the point at which you should exit. You can also set a target for the day and then exist the market for the rest of the day if you reach the target. Preparing entry and exit points in online trading helps you minimize loss. Some day traders continue trading even if the profit target is met. This tendency is better avoided. The practice of exiting the market as soon as the profit is met helps you maintain discipline.
It is recommended to create a stop loss point. This point should be defined prior to entering the trade and should not be dynamic. This strategy helps you reduce the amount you lose. People involved in online day trading can use real time software to prevent trading during loss. The exit point is fed into the system. As soon as the value falls to the stop-loss point, the software triggers a market order to exit the trading.
Also, day traders take care of their trading capital. This capital should be protected at all costs during online trading. It is the lifeline of your day trading. In short, traders should plan their entry and exit points, stop loss points, and percentage of profit and loss to be incurred for better day trading.