The Complete Day Trading Education for Beginners: A Course Book to Successfully Setup & Learn the Rules, Secrets, Techniques, Psychology, Systems & Strategy for Stocks, Futures, Forex, ETFs & More

Day trading defined

Day trading is all about people holding their positions for only a day. They close out their securities at the end of each day, and then start anew the following morning. Swing traders, meanwhile, hold their positions for days (and sometimes, months), while investors tend to hold them for years.

Its short-term nature allows some risks to be reduced, because there will be no more chance of losing money when something happens overnight. While many investors – the patient ones who go long-term – have already gone to bed, knowing that their position is in good shape, they might wake up to find that the company reported horrible earnings or the CEO will face fraud charges.

However, there is always a flip side to every situation. The day trader’s decisions must work out within the day, or the money flies away. There is no tomorrow. Swing traders and investors, meanwhile, have more time to study things. In the long run, the markets stay efficient, and all prices will reflect information about a particular security. It can take a few days of short runs, unfortunately, for the efficiency to finally kick in.

Hedgers VS Speculators

Trading falls into two categories: hedgers and speculators. Speculators want to profit from the price changes. Hedgers, meanwhile, look to protect against price changes. Day traders are speculators because they want to make money from the market as they currently see it. They manage their risks by allocating their money with caution, using the stop and limit orders (that close out positions as soon as the predetermined price levels have been hit) and closing out at the end of the day.

Day traders do not manage risk by offsetting positions the same way a hedger does. They use different techniques to limit their losses, such as stop and limit orders, and careful money management.

Hedgers make their decisions as insurance and not to make profit, so they pick positions that will offset their exposure in another market. A food processing company, for instance, might look into hedging against the price increases on their key ingredients by purchasing futures contracts on such ingredients. If the prices go up, the profits on the futures contracts will help fund the higher ingredient prices. If the prices go down or remain the same, then the company only loses the contract price and may become a fair trade-off.

It is important to understand that different participants have different expectations on their profits and losses. This understanding can help a day trader make better decisions every trading day because in this zero-sum market, a person’s gain is equivalent to another’s loss.

Zero-sum game: who wins and loses?

There are exactly as many losers as winners in the zero-sum game. Day traders love the futures and options markets, and these are zero-sum markets. A person who profits from an option, then the person who sold that option will lose the same amount. To make the long story short, there is no net gain or less in the market as a whole.

Hedgers are already content to take a few losses to prevent the big ones. Speculators, meanwhile, may have the advantage to profit in certain market conditions. However, speculators cannot count on this advantage all the time.

You might ask: who wins and loses in this zero-sum market? It all depends on luck, but the winners in the long run are those who are the most disciplined. Disciplined traders have plans, set and stick to their limits, and trade based on gathered data and not on emotions (like fear and greed).

The stock market is not a zero-sum arena. Unlike the futures and options markets, company profits will grow as it grows, causing stock prices to rise. There will be more winners than losers in the long run, but this is not always true in the short term. When looking at the present situation, the stock market should be seen as a zero-sum game.

You will have a better understanding of the risks that you take, and the risks being taken by the others when you study how the profits are divided in the markets you trade. People do make profit in the zero-sum markets, but you would not want those winners to make money off of you.

Goal-setting

Day traders start their day fresh, and finish it with a clean slate. It reduces some of the risks, and requires discipline. You always have to take profit at the end of the day before your winning positions turn into losses.

Discipline is extremely important in day trading. When you day trade, you will face a market that does not care who you are, what you do, or what your goals are. You have to develop a plan that will reflect your personality and goals. The next step is to set your working hours and days, and close out at the end of each day.

Part-time trading

Some people do make money from part-time trading. They see trading as a part-time job, and not just a game to play when there is nothing to do. Part-time traders may commit to day trading several days a week, and then closing at noon and not at the close of the market. Successful part-timers still have a plan, set limits, and acts like a professional trader – even for just a small part of their day.

It works best when you set and keep fixed working hours. If you wish to be a part-time trader, then find hours that will best suit your schedule and stick to it. You must have a dedicated workspace that comes with a high-speed Internet connection and a computer that you can use to trade.

If you have kids, then you may need to hire child care during trading hours. If you have a day job, then set your trading hours before or after your work time. It is not advisable to trade using your mobile phone during your commute or while driving.

You should not consider it as a hobby, as well, because it is a bad idea. Without a plan and commitment, you are only increasing your chances of losing money.

Beginner’s luck

The first success is almost definitely because of beginner’s luck. If you make money for your first time, then take a step back and try to figure out why. Luck, if there really is one, can turn against any trader at any time.

Day traders commit to what they do. Even then, most of them fail in their first year. Training services, brokerage firms, and other traders can make trading seem easy peasy. The truth is that day trading is a job that you should commit into in order to succeed.

Day trader favourites

Most day traders choose one or two markets, and focus their energy on them. They study how their chosen markets move and trade, how news affects the prices, and how other traders respond to new information. In addition, focusing on one or two markets will help traders concentrate.

Below are the most popular assets among day traders today:

1.Financial futures: Futures contracts let traders make money from the price changes in market indexes, like the Dow Jones Industrial Average or the S&P500. Traders are exposed to the prices at a lower cost than purchasing all of the stocks individually in the index. However, they tend to be more volatile because decisions are made based on expectations.

2.Forex: Short for Foreign Exchange, the Forex involves trading in different currencies around the globe to profit from the changes in exchange rates. It is the biggest and most liquid market around, and it is open all day, every day, except Sunday. Since most price changes are small, traders use leverage to make money.

3.Common stock: Day trading all started in the stock market, and it remains to be popular among traders today. They research on company performance, and make money from price changes. The only downside is that things will become stressful at tax time if traders are not careful.

Personality traits of a successful trader

Not everyone can day trade, and not everyone should try it. Here are some traits that make a successful day trader:

1.Independent

A trader should know that their decisions will depend on them alone, and not anyone else. He or she has sole responsibility when something goes wrong. The good news is that a trader can decide on what works and what does not, without any annoying boss or corporate drone dictating him or her what needs to be done for the day.

However, receiving support and encouragement from loved ones can still boost a trader’s confidence, no matter how independent he or she is. Isn’t it more comforting to celebrate successes and failures with somebody else?

2.Decisive

Day traders know that they have to move and decide quickly. There is no tomorrow in day trading. If a trader spots an opportunity, he or she will grab it. Now.

Of course, there will be bad decisions. This is the risk of making any form of investment. Always remember