Buying and selling of financial instruments like futures, currencies, options and stocks with the sole aim of making a profit from the buying price and the selling price is known as day trading. The main difference between day trading and other trading is that in a day trading, positions are not held overnight or when the market is closed for the day.
Formerly, only financial companies like banks were day trading due to their access to exchanges and market data but now with the advent of Internet, individual traders can make day trading at a very low cost having direct access to the exchanges.
There are many styles in day trading ranging from short-term scalp where positions are held only for a few seconds or minutes to longer swing and position trading where a position may be held through out the day depending upon how the trade is doing.
There are different types of day trading namely trend trades which is the trade in the direction of the current price movement, counter trend trades which is against the direction of the current price movement and ranging trades are trades that move back and forth between the two prices.
There are many financial markets that can be day traded offered by various exchanges. The major markets are futures, options, currencies and stock markets.
Futures can be based on currencies like Euro, British Pound and Swiss franc. Futures based on stock indices like DAX, NASDAQ and futures based on commodities like oil, gold, wheat and so on and currencies like Euro to US Dollars and Euro to British Pound are also available.
Day traders can have access to all of the exchanges and their markets through direct access brokers like interactive brokers and transact futures. Choosing a day trading market depends upon various factors like the initial financial status of the trader, the trading system and the geographical location of the trader. A market that moves at a medium pace is best suited for a beginner of day trading.
The first important factor is the trading margin availability, which is the amount to be deposited while opening a day trading. The trading personality of the trader also plays a role because some traders take their own time to trade while others are content with making their trades quickly. The geographical location of the trader makes much difference due to the different markets’ trading times. The trading style also varies from market to market. Some markets move slowly and steadily while others move very quickly even without a warning. Since some traders would like to take some time before making decision they prefer markets that move at a medium pace.
Some popular day trading markets are available to traders in different locations because they trade 24 hours a day. Therefore, in a nutshell, for beginning day traders the best markets are the ones that satisfy the following criteria.
Low initial and maintenance margin, smooth and consistent moves, low tick value, which is the value per minimum price change and accessibility to traders in different locations.
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