As a day trader to be successful and earn his living, is the dream of many. How realistic is that?
Day trading means that a position on the same day as closed is opened. This is the only valid definition, the position for hours, minutes and even seconds can be kept within the day’s range.
For the very ultra short-term trading in the seconds to minutes, the term has also scalpingnaturalized (the trader scalpt short-term price swings off), but there is one principle for day trading.
The main reason for daytrading is located in avoiding gaps, so price gaps that can develop overnight each value. These price gaps can be in favor or against a received position, but they can not be calculated in each case, which is compensated by day trading.
Classification of Daytradings in the trading activities
Traders and investors may hold positions for weeks, months and years, this so-called position trading can be very profitable and are relatively low-stress after a certain point. It requires, however, certain conditions. First, the choice of trading instruments is crucial, because while day traders for reasons of money management deal almost exclusively with highly leveraged derivatives that can expire worthless by a Overnigth gap, position traders prefer low leveraged derivatives or equal to the actual underlying, that is primarily a stock or a commodity -Future.
Most likely the difference between position and daytrading basis of one share and one depicted on it derivative is to be understood. When you buy a blue chip as pure shares, or about the stock of a DAX company can assume that they do not expire worthless in the coming years. The Blue Chip has its status as particularly valuable paper within the thirty Dax stocks, because the company is so strong that bankruptcy and a worthless expiration of its shares will be excluded at this stage. So if the stock suffered a one-day gap, it may perhaps fall to two or three percent there, but it is not worthless. By the way, it can also increase by that amount overnight. The investor can ride out this Gap.
But if it is a derivative – a CFD or a knock-out – bought these shares, which can move by 100 percent on the trading well, this derivative may also fall overnight by 100 percent and thus be worthless.
By contrast, the trader can by plus500 review a stop loss hardly protect in principle. There are various hedging strategies against this, but these fall out highly complex. Logically appear daytrading. The derivatives are bought on the trading day and sold before the close in any case, regardless of profits or losses .
Especially relatively low-capitalized traders with accounts between a few hundred to a few thousand euros can hardly act differently if they want to see a result of their actions. If these traders, however, bring a lot of patience, they can operate Position Trading with low leveraged derivatives and a certain strategy.
On the other hand, operate the Trader also working for banks and hedge funds with derivatives daytrading. That is precisely criticized (Warren Buffet: ” derivatives are weapons of mass destruction “) because here millions of dollars are used, the highly leveraged involve high risks. Much of the financial crises since 2007 has been caused that.
Classification of Daytradings in the trading activities
First, the benefits are briefly described and then the necessary action will be explained. The benefits include:
- No risk by Overnight Gaps
- Gains realized on the same day
- Losses remain under strict control
- Act with relatively low capitalization possible
- Derivatives trading in the Forex market possible
The risk of overnight gaps is difficult to classify and understand only with some experience. If you want to get an idea about it, you look at some forex values such as EUR / USD, EUR / GBP, USD / JPY, EUR / JPY or GBP / USD. Also, the Dax is very interesting, it is often used by many trading newcomers for the CFD or knockout trade, by the way wrongly. There are much better values also and especially for day trading.
If you look at these values now on a five-day chart, you will notice that the values have occasionally ended this detailed etoro review provides in the evening somewhere else when she opened the next morning. With this, the opening of the German stock exchange is meant. There are some brokers that allow overnight trading in the forex area, but first you have to sleep sometime, secondly, there is currently little experience with whether the overnight trade connection works really well to an American or Japanese stock exchange.
Many traders prefer a German broker with German support or traded on German trading centers such as Stuttgart derivatives. There you can trade from Monday to Friday from 08.00 until 22:00 (but not every security) and the stock exchange between 9:00 a.m. to 8:00 p.m. over the counter. We recommend always exchange trading with buy and sell stops, because any broker falls at some point in time, if only for minutes. If the order is placed at the stock exchange, it is still triggered. So you can stop-buy plan your actions and stop loss, namely intraday.
Those who book a lot of values that can ride out the overnight gaps with derivatives theoretically because some gaps be in favor of the trader. But sometimes markets plunge overnight off completely, which was, for example, after the Fukushima disaster like this. On Monday morning, 3/14/2011, no traders in the world wanted to have derivatives in the portfolio, unless short positions on the Nikkei (the Dax fell well off).
When day trading a position is posted, according to chart technical point of a positive development can be expected within the next few hours by the. Then, the position is secured with a stop loss to recommend are about 10 to 20 percent below the entry, which in turn should represent one to two percent of the total available capital .