Day trading is highly remunerative as well extremely risky also. Simply speaking, day trading is trading in stock or commodities intraday. The trader do not carry over the position, but take advantage of the intraday market movements by buying and selling according to the market trend. You can become a millionaire or even billionaire through day trading. The benefits of day trading are:
1. No Establishment Expenses: You need not to have an expensive office or staff to attend clients. No clients will be visiting your office, as you don’t have clients at all whereas you will be the client of a broking firm.
2. No Employment Process: If you apply for a job, you have to attend an entry level test for some jobs like that in banks. Once you pass the test you may have to appear for an interview. Ultimately, you may or may not be selected. You need not undergo these cumbersome processes to become a day trader.
3. Limited Working Time: As an employee you may have to work not less than 40 hours in a week. In some cases you may have to sit late and your working time may go up to even 12 hours a day. As a day trader, your maximum working time is limited to 30 hours a day. You can even limit your working time to 2 hours per day and the rest of the time you can spend on your hobbies or household matters.
4. No Boss, No Firing: In day trading you are the boss and you will be fixing your target and deadlines. Hence no one will fire you for not achieving targets
5. No Threat of Loss of Job: As an employee you will be always under the threat of losing the job for various reasons, sometimes on account of the mistakes committed by someone else. As a day trader, you don’t lose your job unless you discard day trading.
6. High Remuneration: Your monthly employment depends on the position you hold in an organization. Unless you are senior or top management professional, your maximum monthly emoluments may be around 1 lakh. As a day trader you can make 1 lakh even within 1 hour. Then imagine how much you can earn in a month. If you know the art of trading, you can mint money irrespective of market trend.
7. Inexpensive: You need not to incur any expenses in day trading. What you need is only a computer, internet connection and an account with a broking firm. Your expenses are the hours you spend on trading.
8. No Qualification: In order to get any employment, you should have the prescribed qualification. You don’t need any qualification to become a day trader. Any person having computer literacy and commonsense can study trading and become a day trader.
9. No Experience: You don’t need any previous experience to become a trader. You gather experience as you trade.
10. No Accountability: In an organization you are accountable to each every activity. You will also be responsible for something and you may also have to show high commitment. Otherwise, you may be denied of promotion and in some cases you may be even thrown out of employment. But as a day trader your commitment, responsibility and accountability are to you only. Hence you need not worry about promotion, loss of job etc.
However there is one disadvantage that day trading is highly risky. Unless you have the knowledge of the market and art of developing various trading strategies, the whole investments may be sometimes lost. Sometimes you may also become bankrupt. Here are certain tips which will help you to become a successful day trader:
1. Less Greed, More Success: Always remember, the greedy will be punished by the market mercilessly. You always fix a reasonable target for a day and should not change this target upwards; even if you find that there are opportunities. Because the market is like fire which attracts flies. If you become greedy and jump into it you are finished.
2. Learn before Jump into Water: You cannot swim unless you have learnt it. You have to learn swimming from a professional swimmer in a pool. You cannot learn swimming by listening to lectures on swimming or reading books on swimming. Market is also like that. You have to learn from a professional trainer by trading under his supervision and guidance and complete the training hours fixed by him.
3. Mock trade before Real Trade: You can learn trading by doing paper trading. In this process you are not losing any money, whereas you can try different strategies and choose the best strategy. Paper trading is done simply by writing down the selected price and lot at a particular time without placing a real time order in the system. Since you are not placing an order in the system, you will not have any monetary liability. If you do this several times you will be able to understand at which point you can make profit.
4. Don’t Borrow to Trade: Never use borrowed money for trading. Borrowed funds involve cost and you may be tempted to overtrade to liquidate the liability. Besides, in the event of a loss borrowing becomes additional liability.
5. Market is not a Source: Market is not a source of funds to meet all your liabilities. Market is a mechanism to enhance your wealth and the excess wealth can be converted into immediate cash. But if you enter the market with the intention to repay your debts, you may ultimately end up in troubles.
6. Derivatives -High Profit- High Risk: Derivatives are hedging tools. But trading in derivatives provides excellent opportunities to enhance profit. Futures and options in stock market can be used for trading also. Trading in options requires less only fewer margins compared to futures. Options can give you high profit, but they are equally risky too. Options can swallow all your investments. Trading in futures also brings you large profit than trading in cash market. But you should learn how to develop trading strategies. Without proper knowledge do not try on futures and options.
7. Volume: You can make profit only if you have sufficient volume. Small volume may need larger movements to earn profit whereas large volume will generate profit even on a movement of one or two points.
8. Keep Reserve: Do not pump all the money at a time. Market may suddenly move against your expectation and if you have a back up source to fund, you can take another position to make profit from the current trend. Otherwise you will become silent spectator of the wonderful trading opportunities that are passing you.
9. Time Zone: Enter and exit at appropriate time zone. It is better to watch the market at the time of opening and wait for the market to form a trend. Avoid Monday mornings and Friday afternoons.
10. Do not Swim Against the Current: Study the market trend first and trade according to the trend. In a falling market never take a long position and vice versa. Swimming against the current will invite huge losses.
11. Do not Carry Over Positions: It is better for a trader to liquidate the position before the market closes. Carrying over positions at weekends at is highly risky because you don’t know what will happen on the holidays. A tsunami or earthquake can pull down the market.
12. Book Profits: Do not allow to lose opportunities. Book profits even if they are small. Opportunities once lost may not come back soon.
13. Cut Loss: Always practice to place stop loss order along with placing an order. This can minimize your losses.
14. Limit Consultations: Too many consultations will make you lose opportunities. You are the best to take decisions rather than depending on others opinions.
15. When it is over It is over: When a trade is completed it is over. Do not feel that you could have made a higher profit had you carried over the position. Feel that what you had done was the best at that time. Worrying on past losses will spoil your concentration and add more losses.
These are some of the tips I learned from my own experiences. There can be people differing from my views. What I learnt from my experience is that over confidence is as dangerous as lack of confidence. If you keep the above rules in mind while trading, no doubt, you can become a successful trader.
No comments:
Post a Comment