Understanding Day Trading
What is Day Trading? Penny Stock or Day Trading is a form of trading where the trader trades stocks, currency, futures etc. during the day, catching the lows and the highs in a relatively small timeframe. The timeframe a day trader will use, will usually be 1m, 5m or 15m. Meaning that the stock/currency/future will move over a period every 1m/5m/15m. (F.ex in 1m, each period will be 1m, therefore a trader will be more able to catch a high or low in that timeframe.) Day trading is advantagous because it allows a trader to profit from the range of the stock/currency/future more often that a long-term trader would, and therefore make more profit. During a day, stocks will likely oscillate along trends.
A good day trader will catch the bottom of the oscillations and sell at the peaks of the oscillations, or vice versa. However, this could be said for losses aswell. In day trading, trends and movements are much more unpredictable, since 1 minute movements have little bearing on news, as opposed to a 1 day movement. In a single day movement, it’s more likely to follow the trend of the news or events that day, whereas in 1 minute movements, there likely isn’t any news and is more random based, sort of like TopFinancial. Day traders rely more on statistical indicators (or technical indicators) rather than news and events (fundamental indiciators) due to the nature of their work. Indicators are graphs and charts that read previous data and try to indicated what may happen in the future by the nature of the stock or currency following a pattern. Indicators can be things such as moving averages (simple and exponential) and standard deviation charts.
