Day trading is a good source of income since all you’d require is a computer with an internet connection. It might look an effortless way to earn but actually, the reality is a lot different. According to the statistics, a lot of people who attempt to approach this world without a plan end up losing a lot of money. In the context of online trading, the term day trading comes often. A day trading is characterized by the limitation of its trades occurring mostly in a single day. A trader buys and sells his trades within the same day, and doesn’t hold the position overnight.
The trading strategies of online trading and day trading
To become a successful day trader you’ll have to understand the basic trading strategies. Since a day trader cannot do big price movement, he has to do with small ones. For an acceptable profit to be generated you have to have a big enough capital since small movement requires. Since not always traders have this kind of resource, they tend to resort to CFD online trading – which is a good solution for moving with little capital while having the leverage effect of a large amount of money.
CFD Day Trading
Since a day trader has to make my trades in a day, it, therefore, is expensive in terms of fees. So having CFD as an alternative is helpful. So the day traders use this profoundly.
Why should you learn day trading?
Day trading might be the most intense type of exchange trading. As they have to rely on minimal market movement and has to trade in small time units. So the market has to be monitored relentlessly and that requires a lot of time of the trader, to find suitable entry signals to deal trades. There is also a routine of regular reviews and adjusting existing positions.
CFD online trading is a short time investment method, and unlike long term investment methods day trading is characterized by a much larger frequency.
The number of trading opportunities increases with the small-time units in trades. So by making several trades in a day, you can reach a higher profit margin. This is how day traders with CFD’s can have an amazing way to earn good profits. So naturally, most traders are leaning towards day trading.
Advantages and disadvantages of day trading
As a special form of stock market trading, day trading is designed for high profit and quickness. Along with all its positive sides, it’s not above the disadvantages. They could be summed up by,
- Higher opportunity for winning: As it was mentioned before, day trading has a high opportunity to earn profits. CFD traders are making a lot of profits in little time but with the condition of having large capitals.
- Freedom of trades: Day trading gives you the freedom to work independently. You don’t even need an office; just a laptop and good internet connection and you might as well sit on top of a mountain to deal trades and none to tell you a thing. The traders also don’t have to deal with any strict working hours. So, you can set your schedule as it suits you.
- Tax benefits: Under certain conditions, you might be relieved from paying taxes. Some countries, such as Switzerland and Germany allows tax-free stock market profit if you’re classified as a non-professional trader. Although it is quite a hassle to register yourself as a trader. So, you can travel and trade to get exemption benefits on profit. However, this won’t work in the USA or Eritrea, since they tax the traders based on their citizenship.
Now about the negative side,
- Constant attention: Day traders are known as full-time racers because while other traders may suffice from only checking their positions once, the day traders have to monitor theirs often. Thus, needing a keen eye most of the time.
- Bulky capital: Before you even start as a day trader, having a big capital is mandatory. Which makes it harder for most of the people who aspire to trade in a day.
Strategies of day trading
Since day traders use help from technical analysis, it weighs heavier than the fundamental part. The case is the opposite for the long term investors, they give more importance to the fundamental part. So, the traders prefer strategies with technical rules where the indicators are consulted and works in line with support and resistance. The theory of market technology is a frequently used instrument which explains the mechanism behind the ever-recurring price fluctuations. Also, some traders base their trade decisions on the fundamental side, known as “Newstraders”. They wait for news that could affect or initiate price movement and makes trade decisions based on them.
In Conclusion, Day trading is a very eye-catchy way to earn and also has its benefits. But since it requires a lot of time and attention you’ll have to be very smart with time management. However, in the age of the smartphone, it has become a lot easier to manage time and portability since you can trade while traveling or even between a meal nowadays. Following suitable strategies will smoothen your path.