Does day trading have any nexus with daydreaming? Yes, it is there provided you know the appropriate meaning of the word “Dream”. To illustrate it further a dream is not what you see when your eyes are closed; rather it’s what you see when your eyes are open.
Trading, in general, connotes buying or selling securities or commodities. Day Trading, however, stands for speculations on securities involving buying as well as selling within the same day. In short, buying and selling must be closed before the closure of the market for that trading day.
Characteristics of Day Trading:
Every product, object or activity has a set of its characteristics based on which the periphery of its work is decided and performance gets appraised. Likewise, Day Trading too has a set of characteristics that govern the success or failure of it that can successfully be ascribed under the head Profit & Risk as a blanket characteristic.
Profit & Risk: Since Day Trading involves buying and selling of securities on day to day basis the person who does day trading must have to be speculative enough backed by facts and figures on the market trends so much so that he/she can successfully read the tendency of any security or securities for the day guided by the current affairs as well. Before investing you should know Largest Companies by Market Capitalization in Each Sector so that you have a prior idea. As such Day Trading can in effect be highly profitable or loss-making and people associated with Day Trading, therefore, are culminated as bandits or gamblers by others of the trade.
Your Day Trading can, however, be proved highly vulnerable if any one of the following elements features there.
- Trading on a losing proposition rather than taking a rational risk by way of trading on a winnable proposition.
- Trading in an erratic manner ignoring your own strategy and rules of the game.
- Not having sufficient or inadequate risk capital thereby high stress on survival.
- Inefficient fund management with regard to trading
- Over enthusiasm or over speculation without sufficient groundwork.
As the characteristics suggest a Day Trader can’t afford to hold on a losing proposition for long; rather has to move on quickly so as to minimize loss out there and safeguard his/her own risk capital. Going by the trend (4x leverage) a Day Trader can afford to $ 200,000 worth of stocks or securities provided he/she has at least $50,000 in his / her account and disposes off 50% of such stocks/securities before the closure of that trading day meaning sale worth $100,000 must be done within the same day so much so that the person has enough of liquidity alias risk capital ready in hand.
Other characteristics of Day Trading that some traders adopt are the following –
- Quick buy and sale yield to many times buy and sale during any given trading day. In the process, the life of such trading may last for as low as a few minutes. This is in stock exchange parlance called intraday technique or scalping.
- Some traders are inclined to follow the price momentum alone while others follow technical patterns.
- There is another trait which is familiarly known as margin trading. It is, in essence, a kind of borrowing to the trade.
On the whole, it’s a high risk alongside the high-profit game that one should be adept enough before playing.