Looking at the un-predictable behaviour of the stock market people are indulging in day trading by the day. This way they do not plan to keep a stock for months or years, rather quit the moment they find 2-5% profits. This also helps them to make a sort of daily income from day trading. There are also some smart investors who enter the market as soon as it dips 10-15% and quit the moment it recovers back to same point or close to it.
Now can everyone do it with that ease. Ask yourself a question had this been so easy then most of us if not everyone would have been in stock trading? You simply cannot go in there and start making big profits from it. You need to have some basic knowledge about company profiles, their balance sheets and thier stock trading range. Having this knowledge will help you to make a decision when the stock hits a low and is a good buy. Some of this knowledge is important even if you are planning to keep stocks for a longer period of time, as the better the stock the better returns will it give over a period as compared to the other which are not performing that good.
To make decent income in day trading you need to follow certain priciples:
1. Stay updated with the market news and spend some time on global news also. Most markets are driven by global factors. Although there are some local triggers that help the local market to behave differently. You do not have to spend hours to get all the news. Well headlines say it all in 90% of the cases. Make a list of 2/3 financial sites that will help with daily news. It is always better to subscribe to their news feed if available, so that it is delivered to your mailbox. This will help you take some actions if some trigger is about to change market situation.
2. Make a list of some select stocks and keep a check on their movement. Do not make a huge list which you will not be able to manage. Say about 10-15 stocks should be good enough. Do select about 4/5 market mover stocks in your list. Market mover stocks are those which can take market in any direction on their day, these are also known as major stocks. Make a note of these companies and go through their profit loss for past 3/4 years. Also keep a check on how their profits/loss are increasing/decreasing. The purpose of this excercise is that if you are stuck with a stock at higher price then keeping that stock some more time will not lead to loss.
3. Stay away from stocks that do not move. Any stock that shows a movement of less than 1% in a day is not good for day trading. Well some of these stocks may be better if you want to keep them for a longer period of time but definitely not for day trading. Any stock that moves atleast 3-5% in any direction is good for day trading. Well you still have to keep an eye on whether it is on its low in the day or has already hit a high.
4. It is very important in day trading that you keep a stop loss and be prepared to book loss when a stock starts to move in a direction other than that you predicted. You do not have to b emotional when you make any decision. Base your decisions on quantitative analysis rather than your instinct. The bottom line is do not try to relate stock market with gambling. In gambling you go with instinct, but that is not the case with stock market.
5. Most important, do not try to evade profits from previous day by making moves in a hush hush manner. Start every day with a clean slate, move cautiously and plan your entry and exit carefully.
It may not be possible to get wealthy with day trading in a short time, but if you make good use of your time, apply proper strategies, make good use of tools and resources available you can definitely unleash the potential that day trading has to make a fortune.
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If you are a day trader then you need to follow these tips of day trading. Information brought to you by stock market trends.
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