There are probably as many warnings about embarking on a career
as a day trader as there are about drinking or smoking! Day traders
are supposedly responsible for creating extreme market volatility
resulting in pension and hedge funds losing millions of pounds and
are generally treated with a degree of contempt by the longer term
traders and viewed as gamblers rather than investors. The fact is
that it takes all types of people to form a market; some of us have
a medium to long term strategy with our money whilst others are
looking to try and make money over a shorter time scale. Without
day traders the liquidity available for the medium and longer term
trader would certainly be poorer, resulting in trades executed as
worse levels and markets having less regular trading patterns
making it more difficult for the technical trading community.
Day trading or active trading is where retail and professional
traders place orders into the market with the intention of keeping
the trades for a short period of time, in some instances a matter
of minutes, and to ensure that positions are square at the end of
each trading session so that they are not exposed to overnight
risk. Many futures and foreign exchange brokers will afford day
traders higher levels of leverage on the proviso that no positions
are left open once the markets have closed.
When day trading it is vital to remain disciplined and to risk
only a small percentage of your total balance. Nearly every day
trader will also use a full range of risk management tools to
assist in the management of their positions.
Day trading is growing in popularity, especially amongst new
traders who are lured by the promises of quick wins and fail safe
trading systems .There are many stories about day traders making
huge profits from the markets in incredibly short periods of time
but it is important to remember that for every winner in the market
there is a loser and that whilst some of these stories may be true
the reality is that it takes time to become a successful day
trader. A considered approach to the markets, whether you are a day
trader or long term trend trader, is always advisable and a full
understanding of the potential underlying volatility of a market is
vital before placing any new trade.