A Quick Look at Day Trading
Investing through a fund manager or other financial professional does have its benefits; however it tends to reduce your ability to have direct control your investments. It also tends to reduce your ability to react to market moving events and reposition your investments accordingly.Therefore some people like to access the markets directly and on a short-term basis. One of the major advantages of day trading is that you are in control and able to quickly execute your trading strategy, often without a middleman.
Spread betting companies tend offer live prices on their websites and you can take almost instant positions on a wide variety of shares, forex and commodities markets.
An advantage of day trading is that your potential profits and losses are limited to a single day. This can help to give you clarity of your overall trading position that you may otherwise lack if you had several different trades open over longer periods.
You are obviously aiming to make a profit at the end of the day. Therefore, as both your profitable and your loss making trades are tallied up as the markets head towards the closing bell, there could be times when it may be advisable to settle your trades whilst you are firmly ahead.
Naturally the financial markets can be influenced by news events, human emotions, such as fear or greed, political decisions and a range of other external factors. Knowing that you are trading within the restrictions of a single day can help you concentrate on the essentials and potential market influences happening during that day.
When day trading, it can be advisable to try to use trading tools such as regularly updated financial market newswires, candlestick charts and instant price quotes. Many day traders will work from home. Whether you are successful or not has a lot less to do with your location and a lot more to do with the accuracy of your speculative positions. Your success will often be determined by how you respond to information sources and other trading tools. Generally, the data and tools that you need can be accessed via your PC.
Some day traders operate on a full time basis, however not all traders choose such a level of commitment. Instead, many devote less time to speculating, only trading during specific times of certain days. With day trading, you can trade as often or as little as you wish, although the more your trade the more difficult it will be to keep control over your entire position.
Because short term trading tends to limit how much the markets can move, and therefore how much you can make, many day traders choose to use leveraged products like spread betting. With investing, leverage means that you only put down relatively small deposits to command much larger positions in the market. Essentially any market movements are magnified. Therefore price fluctuations can be quite significant, even over short time periods. This means that your potential profits and losses are also magnified.
Spread Betting Companies – Account Services Comparison
 |
 |
 |
 |
|
| User Ratings | 7.6 | 6.6 | 6.7 | 7.1 |
| Web Platform |
 |
|
|
|
| Mobile App(s) |
|
|
|
|
| iPad App |
|
|
|
|
| 24 Hour Trading |
|
|
|
|
| Live Charts |
|
|
|
|
| Stop Loss Available |
|
|
|
|
| Automatic Stop Loss |
|
 |
|
|
| FCA Authorised and Regulated |
|
|
|
|
Market Analysis
If you are familiar with trading, you will know that many investors trade in stocks, commodities, currencies and even stock market indices.With any one of these assets it is possible to trade them over the short, medium and long term.
Traders that want to benefit from longer term movements in the prices of these assets often prefer to become a swing trader or a long term trader.
A swing trader typically buys and sells assets over a period of days or weeks, while a long term trader usually tries to profit from price movements that take place over months or even years.
A day trader, on the other hand, is someone who generally prefers to buy an asset and sell it again the same day.
This can be for a variety of reasons. For example, some traders are wary of overnight price movements that can be based on events which occur whilst the trader is away from their desk.
Another key example is that financing fees for any borrowed money, or financially leveraged positions, are generally charged overnight. As a result, closing all open positions before the end of the trading day can reduce the investor’s costs for investors trading through spread betting and CFDs.
Financial Spread Betting and Contracts for Difference trading do carry a high degree of risk to your investment. The gearing on these investment formats does mean that you may lose more than the funds you initially committed. If you are investing through CFD trading and Spread Betting, please make sure you always trade with capital you can afford to lose. Before you start trading ensure that you recognise the risks involved. Be aware, CFD trading and Financial Spread Betting may not always be suited to your trading strategy. Where appropriate, seek impartial financial advice.
Day Trading and Fundamental Factors
Many long term and swing traders make use of so-called ‘fundamental factors’ to guide their trading decisions.Fundamental factors typically reflect important news factors, such as company profits, inflation rates, economic growth rates, unemployment figures, and new product launches.
If a company should therefore declare record profits, these traders might believe that the company’s share price will react favourably to this and so buy stocks in that company.
Since a day trader works in very short time frames, fundamental indicators such as inflation rates and unemployment figures, often have less impact on their trading decisions because they are inherently longer term in nature.
As a result, many day trading investors prefer to use ‘technical analysis’.
Day Trading and Technical Analysis
The underlying principle behind any technical analysis is the belief that the past performance can be a guide to future price movements. It should be noted, however, that this cannot be guaranteed to be the case.The basis of technical analysis suggests that, since most market players have access to all relevant information, the price of a share, commodity or currency at any given moment should already incorporate all of that information.
As a result, proponents of technical analysis would suggest that by the time a company declares a record profit, the share price will already reflect it and so it would be too late to buy its shares.
Technical analysis experts often do in-depth statistical analyses of the price movements of forex, commodities or shares over time and then use that information to make projections of future price movements.
One of the simplest examples of a technical indicator is the Moving Average which many financial traders use as a guide when making trading decisions.
Some investors use short term averages whilst others use six-monthly and even yearly averages. It is often suggested that if the price of an asset starts trading above its moving average then that is an indication that it may continue to rise.
Other popular technical indicators include price oscillators, momentum indicators and Fibonacci retracements.
Spread betting and CFD trading carry a high level of risk to your capital and you may lose more than your initial investment. Spread betting and CFD trading may not be suitable for all investors. Only speculate with money that you can afford to lose. Please ensure you fully understand the risks involved and seek independent financial advice where necessary.