Glossary Business Day Trading

Day Trading

Day Trading is a financial activity where the trader speculates on securities in the financial market. Financial markets have short-term and long-term holds on security. Day trading limits itself to only those financial securities it can buy and sell in one day. Any purchase or sale of a financial instrument like a stock, bond, or currency is considered to be a long-term hold. There are advantages and disadvantages to being a day trader or a trader of long-held securities.

A day trader normally has lots of time during the day he can use to analyze and monitor the buying or selling of a security. Most professional day traders (who do this full-time) believe that the educational curve in learning to day trade takes as much as nine months to a year.

blue and yellow graph on stock market monitor — day trading
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How much does it cost to begin Day Trading?

Professional Day Traders recommend starting anywhere between $3000-5000 in your Day Trading account. A good rule of thumb for a day trading is to never use more than 5% of your entire portfolio account to purchase financial security. Many different Day Trading techniques can be used to safeguard the 5% investment of your trade for the day. First, a person who is day trading can put a limit on how much he is willing to lose every single day, between the open and closing times of the market. This kind of monitoring allows day trading to work within the boundaries of healthy and uncomfortable loss for the day trader.

Are all Day Trading made Equal?

Depending upon how much a day trader wants to use for his savings in day trading, the amount of knowledge he/she has about the markets they are trading, it may be more prudent for one person to do their day trading in futures, while another person is more comfortable in day trading international currencies.

Can a person lose day trading?

Yes, since every kind of financial security needs constant observation and knowledge building. With both the time to monitor individual trades from every day to end every day. One reason why a good practice recommended for day trading is to put a stop order on every trade. A stop order allows the day trader to reduce the amount of money he could lose by “stopping” the order from going any further than what he is willing to lose on a given day. Day traders should restrict themselves to limiting his losses to no more than 5% of his entire portfolio.

Can Day Trading be Profitable?

Day Trading can be profitable, but the degree of profitability depends upon how much capital he has in his portfolio. How much is the day trader willing to lose? How much knowledge does the day trader have of the market they are trading? How much discipline does the trader have in controlling his balanced game plan over his irrational response to the market? Is the day trader falling more into “revenge mode” than applying a reasoned game plan?