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Day Trading Guide

What is Day Trading and why would I want to do it?

Day trading is the practice of buying and selling shares or options using the short term strategy of purchasing them in the morning and selling them before the close of trade that day. Naturally, the goal of anyone doing this is to make a profit. Day trading options and shares has become increasingly popular over the past two decades. Many individuals without previous experience or any knowledge of day trading strategies have attempted day trading. Whilst many have been successful, others have fallen victim to a lack of knowledge and understanding of the share market and appropriate day trading strategies.

It's worth making the time to gain the knowledge and understanding because the benefits of successful day trading are significant. You can work from home and be your own boss. To be able to do that would be a dream come true for many people. Of course, to make it viable, you need to be able to make a profit equivalent to or greater than the income you would earn at a day job.

How do You Begin Day Trading?

The first thing you should do if you're considering day trading options or shares is gain as much knowledge about it as you can. You can do this by attending some of the numerous seminars on offer, reading books on the subject and speaking to successful day traders. Once you understand the basics of trading, look for a good day trading guide relevant to the type of trading you plan to do. Day trading options is more complicated than ordinary shares so look for a day trading guide specific to day trading options.

When you are confident and ready to begin, setting up isn't difficult at all. You'll need software that gives you access to the stock market information in real time and provides a platform by which you will buy and sell your shares or options. The software is readily available online and generally inexpensive.

Before you part with any money, ensure you have sufficient knowledge of the type of shares you are buying and the company involved. Research the company online and take note of any recent news items about them or their products. Beware of any rumors you find on a share trading talk forum. Stocks can travel quite some distance on a few good rumors before they tumble back down. Research and verification of information is one of the keys to successful day trading.

What Makes a Successful Day Trader?

There are a number of personal qualities that good day traders seem to possess. The most important ones are discipline and a lack of greed. These two qualities go hand in hand. People who have lost large amounts of money day trading have generally done so because they continued to hold their shares hoping for an even greater profit, or refused to sell a share on its way down because they didn't want to lose any money. A person with discipline has day trading strategies in place that prevent major losses.

Day trading strategies generally include having a solid plan. It is likely to involve an entry and exit strategy. An entry strategy is a list of criteria you use to decide when you will purchase a particular stock. Your exit strategy should determine a point at which you will sell your shares. It should identify the point at which you have made a tidy profit and will sell even if the shares are still rising, and also the point at which you will sell those shares to avoid a heavy loss if they are falling.

This is where the discipline comes in. Once you have your day trading strategies in place, you should stick to your plan. If you lack discipline you can be tempted to hold shares either to make a larger profit or because you hope falling shares will go back up and you will get your money back. Experience has taught many that this is rarely the case!