What is Day Trading?

Day Trading Defined

Day trading involves engaging in stock market trades in relatively large volumes, endeavoring to boost overall gains by capitalizing on same-day market price fluctuations. The goal of day trading is to generate profit by leveraging the potential of extremely short-term investments. Both the New York Stock Exchange and the Financial Industry Regulatory Authority issue the classification of “day trader” to anyone who engages in day trading four or more times during a five-day timeframe.

Working as a Day Trader

Although a certain amount of education and training are key to finding success as a day trader, the practice of day trading requires no special qualifications. While day traders use a wide range of systems and strategies, they universally seek price action caused by temporary supply and demand inadequacies that arise from the purchase and sale of a given asset. In other words, they follow prices very closely to take advantage of brief changes, often buying and selling the same financial instrument multiple times over the course of a single day.

Many people are drawn to day trading for the extreme freedom and profit potential that it presents. Acting as their own bosses, day traders have a unique opportunity to escape the daily grind of a traditional job and truly take control of their futures.

Although day trading can be extremely lucrative and satisfying, it also presents considerable risk and a high level of uncertainty. For this reason, day traders must perform substantial technical analysis and exhibit exceptional self-discipline and impartiality. Appropriately named, day traders typically seek to establish firm closing positions before the closing bell at the end of the day.

How to Sleep Better at Night as a Day Trader

By ensuring that all investments are in secure positions at the close of the trading day, day traders can sleep soundly. They often close all trades before day’s end so they do not hold open positions overnight. And by following a sound investment plan, they won’t have to worry excessively about what the market will do tomorrow.

Average Frequency of Trading

To take advantage of the enormous profit potential inherent in a highly volatile market, day traders must execute trades relatively frequently. In fact, some day traders hold positions for mere milliseconds before selling.

Of course, the optimum amount of time to hold a particular financial instrument depends on a whole host of market conditions and investor goals. The day trading experts at Prosperity Trading generally recommend holding stock for anytime between 10 seconds and several hours.

The key to buying and selling as a day trader lies in a close analysis of price wave patterns. Stock prices don’t rise and fall in straight lines. Instead, they tend to experience uptrends and pullbacks at irregular intervals.

Investors who take long positions often endure pullbacks if they predict an overall uptrend in a particular stock. However, they cannot be certain that this uptrend will actually occur or sustain over time.

Day traders, by contrast, generally try to avoid pullbacks altogether. By abandoning positions before they experience a pullback, day traders may generate smaller profits from each trade, but they generally make more consistent profits on multiple daily trades while more effectively avoiding losses.

For More Information

To learn more about day trading and how to get started, contact a day trading expert at Prosperity Trading. Whether you are in need of exceptional day trading tools and guidance or seeking to find a community of day traders who can inform and support you, Prosperity Trading has exactly what you are looking for.

Prosperity Trading is an online, subscription-based community for day trading instruction that provides real-time guidance to people of all experience and skill levels. If you want to learn how to consistently make money by day trading, sign up for a Prosperity Trading subscription today.

The free trial offer from Prosperity Trading is a great place to start. This exceptional offer gives you access to the exclusive Prosperity Trading platform for seven days at absolutely no cost. Free trial members interact and trade live with experienced day traders as part of the official Prosperity Trading chat room community.

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