If youre really new to trading, you might be a bit confused about exactly whats involved with day trading in particular. Let me explain the most basic ideas as well as the advantages involved with day trading.
First of all, day trading means closing out transactions on the same day you open them. Generally speaking, youre doing one of two things
* Buying because you expect the price to go up (and then selling for a profit) or
* Shorting because you expect the price to drop (and then covering your short for a profit)
In day trading you are never holding a trade overnight. Your trading positions are held for minutes or (at most) a few hours. You might be only buying (or shorting) on a particular day. Or you might be long and then short the same security on the same day if your trading signals tell you its time to buy or sell at the appropriate time.
No matter what, you simply respond like a well-trained chess player to what the market gives you that particular session. Taking such a short term stance to trading offers the following advantages:
* No Overnight Worries: You dont take your day trades home with you (theres nothing to keep you awake at night worrying about an adverse market move your work is done when the market closes and you have no market exposure)
* No Locked-Up Funds: You can quickly re-deploy your day trading capital into the next available opportunity for maximum Return on Investment (ROI) over the course of a day, week, month or quarter its trading on fast-forward!
* Quick Returns: You can generate a stream of regular day trading profits in quick succession if you have a system that works well and you follow it consistently. However, following your own system consistently is the hardest thing about day trading.