Economic Situation / Day Trading: Related?

Day trading. Undoubtedly, the term conjures up images in your mind of serious-faced individuals sitting hunched over at their desks, alert eyes focusing on the flickering computer screens before them, closely following dancing digits and changing charts. Very true, and correct, image. Another thing that, in all probability, occurs the moment you think "day trading", is that in your mind you automatically equate it with an "economically sound" economy-commonly and simply referred to as a "good" economy. And that is a point that we would like to discuss, dissect, and disprove in the context of this article.

For some obscure reason, there are those of you out there who mistakenly assume that successful day trading can only take place during times when the general economic situation is good, during a period of economic prosperity. You couldn't be more wrong. But, on second thought, the reason for your thinking that way may not be so obscure after all. We can, perhaps, understand your line of reasoning, understand what leads you to erroneously believe that, in order to do well in day trading, the economy has to be stable and on the up side. Your brain tells you: President Obama is lecturing nonstop about the sagging economy and various related topics + people around you are doing very poorly in business these days + stockholders are anxiously trying to keep afloat amidst tremendous losses = delete any and all notions or intentions of day trading, for it is impossible to "make it" in the market when the economy finds itself in such a weakened state. Right? Wrong! Had the previous statement been an answer to a question on an exam, a teacher grading the test paper would swiftly circle it and clearly mark it in rich red lettering "incorrect equation". Due to a lack of proper knowledge on the subject, your brain is feeding you misinformation!

Let's delve a bit into some of the details and dynamics involved in day trading, so that we can better comprehend how, and why, it is that day trading holds potential for success regardless of the economical state of affairs. Day trading deals with the here and now, with the happenings in the market on a minute-to-minute, and even second-to-second, basis. While the market busily fluctuates throughout the day, going through its expected ups and downs, day traders attentively monitor the proceedings as they wait to take their plunge. They observe the prices of shares escalating ever higher, and then, moments later, dropping drastically. They keep track of stocks that were worth pennies minutes ago, suddenly soaring to significant values. And somewhere in between these goings-on, the ever-ready day trader will grab an opportune moment to take a position and turn himself a profit. He might decide to purchase a share at a low cost with the confidence, acquired through careful analysis, that he'll be able to sell it shortly at a rate that will yield returns. Or, he may choose to short-stock: he will sell a share for a specific amount with the intentions of buying it back, say in a couple of hours, when the price will go down. Again, according to meticulous calculations on his part.

We have a setting here of a market where shares are being bought and sold all day, where prices are constantly rising and falling. This is a daily situation, an anticipated situation. The market opens at nine thirty, day traders diligently begin buying and selling, price tags keep being altered to the up or down side. And this setting doesn't change. The scenario repeats itself day in, day out. So, whether the economy is spiraling downwards, or whether there is big talk of the market tanking, it doesn't affect what occurs in the day trading arena. Because with day trading, it's current movement that counts. It's what's happening this hour, this minute, this second that makes a difference. Unlike stockholders, who acquire stocks and hold on to them for long periods of time-months, and even years-and therefore can unfortunately find themselves stuck with shares that are practically worthless during a phase of an economic decline, day traders "do their thing" and are out of any position at the end of the day, at market close. Stockholders are long term traders; day traders complete their transactions in anywhere from a few seconds to a few hours.

And that is the precise logical reason why the general economic, or market, state doesn't influence the success rate of day trading. Conditions may be good or bad; it doesn't carry relevance as far as day trading is concerned. For in a setting as described above, there is always opportunity to dive in at the perfect moment and "make that pitch". Of course, we all hope for an up market, for a healthy economy. The point is that, up or down, healthy or unhealthy, scientifically it doesn't affect day trading.

In summation, we now have a clear grasp of the distinction between day trading and long term trading (or day traders and stockholders), and of why the economic and market circumstances don't have a bearing on the outcome of day trading efforts. We now know unmistakably that a "bad economy" doesn't translate into "keep away from day trading". We have cleared all misconceptions by learning and internalizing that day trading centers on what transpires intraday, that day traders take advantage of the now.