Understanding Day Trading

Day Trading is one of the fastest growing trends in the financial and investing arena, but understanding day trading and what’s involved is very important before getting started. Both the US and Europe are facing large unemployment numbers, which is forcing large numbers of people to look into alternative ways to replace lost income. There are very few places that people can turn where the potential to make large sums of money in a very short time are available, so day trading is very alluring for many of those struggling to find a way to earn a living. It is certainly true that day trading is difficult and that more people lose money than those that actually make money. If you ask the majority of people that have tried their hand at day trading, most will tell you that it is not possible for the average person to break into day trading as a living. However, this does not mean that it is impossible to become a profitable day trader, so if you are someone that likes challenges and you have some spare time in which to devote to learning this profession, then continue reading and we will explain to you how you can learn to day trade without the risk of the recent past.

If you are reading this article, then we are going to assume you have a basic understanding of what day trading is all about. In its simplest form, it is the buying and selling of financial instruments all within the same day. The main goal of a day trader is to be in and out of the market all within the same day with a profit to show for their efforts. Many will argue that day trading serves no real purpose, but this is not true. The most important fundamental that day traders provide to the market is liquidity, which allows the markets to trade much more efficiently. While there are also many different financial instruments that one can day trade, we are going to concentrate on futures, because they are much easier to day trade for many different reasons, most notably the fact that a trader is not required to maintain a minimum account balance of over $25,000.00 in order to day trade as is required when trading stocks.

While day trading is often considered a form of gambling, this is completely untrue as long as you don’t approach it with a gamblers mentality. There really is a rhyme and a reason to price movement, and if you spent the time as a student of the markets, you would come to understand this and you would easily agree with me. Having said this, day trading can still be very risky if you approach it with the mentality of a gambler rather than as a business. Just like entering into any new business, one needs to spend the necessary time and energy to learn the business. There is also the need to invest a minimum amount of money into any new business if you expect it to survive, and trading is no different. Day trading futures is a business and you should treat it like a business. This means you need to learn the business from the ground up. The best way to do that is to find a mentor or a trainer and then spend the necessary time working in that business as an apprentice. You would not actually want to open a new business prior to knowing it inside and out, and so it is with day trading as well.

With today’s simulator software, you can open you own account with simulated dollars and trade that account using real time price data for free at many different futures brokers. The only additional part you need is the mentor or trainer and time or experience. The mentor or training may seem like a trivial or simple piece to the puzzle, but it is not. There are as many different losing strategies and teachers as there are losing day traders, so finding a good teacher is not easy. If you think day trading is for you and that you would like to give it a shot, then spend some time and find the right strategy to learn before you do anything else, as this will be the key to whether you make it or not in the day trading world! In my opinion, anyone that is making a profit as a day trader is someone that has a true understanding of prices and price movements. Most new traders believe that there is some magic formula or secret ingredient that profitable traders know and use to make money day trading. Nothing is further from the truth. The bottom line is that profitable traders know and understand price action, so they can read a chart and gain a percentage edge over the majority of traders that are actually nothing more than gamblers.

If you would like to learn to read a chart and get a true understanding of “why” prices are doing what they are doing and what they are likely to do next, then you need to learn price action or what is known as price action trading, which is simply the complete understanding of prices and price movements and the tendencies that these movements display over time. If you plan to become a day trader, then you should plan to learn price action and you can find out more by going to http://priceactiontradingsystem.com/pats-price-action-trading-manual/. Otherwise, you will very likely end up as another statistic in the day trader world and be the next gambler to lose his bankroll trading against the professional chart readers that know and have a good grasp on price action.  Understanding day trading and what’s involved is very important, so do not lose sight of that fact!