If you’re new to day trading, this article is for you!
You might have heard about day trading from friends.
A day trader who makes big bucks in the stock market and enjoys its a glamorous life.
It’s somewhat true for seeing someone very successful live a very wealthy life, but not all are fortunate to get a hang of day trading.
Let me digest what is day trading in this article and see how does life look like for day traders.
What is Day Trading?
For those who are new to stock trading, a day trading is a style of trading strategy that you buy and sell stocks on the same day.
The mentality here is that day traders do not want to hold the stock for too long.
Why? It’s because the longer you hold the stock, the higher the risk of getting caught in losing money.
It might be difficult to understand why now, but believe it or not, day trading is all about managing risks of NOT to lose money.
It means that day traders usually look for a quick opportunity in a stock market when the possibility of winning the trade is high.
Then, you’ll ask “but how!?”
Let me explain.
Day traders use technical analysis to look for an opportunity to make profit
Day trading is not a gambling play where outcome comes in pure luck.
There are a lot of ways that day trader builds its confidence when they take a trade, and it’s called technical analysis. Technical analysis is a way to study a pattern on a chart, and those who do it are called pattern day trader.
You probably have seen something like this before.
Day traders look for a specific pattern on a chart using study analyses and take the trade that typically tells the trader which way the chart is moving. The trader will spend a lot of time practicing this so that when they put the money on the market, they know what they expect in return either winning or losing.
It might sound quite simple, but there is another world for technical analysis on the internet. I’ll also touch on the technical analysis separately in different articles.
Rules and regulation of day trading
Well, you don’t need a license to become a day trader.
To become a day trader, you want to trade every single day when the market is open, then there is a federal rule that applies to US-based broker firms to control day trading.
Financial Industry Regulatory Authority (FINRA) makes all the rules for trading within the US soil. For what it matters for a day trader is called Day-Trading Margin Requirements.
If the balance goes below 25,000 USD, you’ll no longer be able to trade until the account balance goes above the minimum required level.
So, I’ve covered basics here about what day trading is.
The next you want to do is to find the broker firm that you want to use, and fund the account! Here’s the article about which broker/platform is most used by the day traders, take a look!