The exciting world of brave hearted day traders is filled with the high pitched drama of making or losing fortunes on a daily basis. Day traders work by the minute and sometimes even seconds, as per the volatile swings of the market. Their earnings depend on how quick and alert they are and their analytical and risk-taking abilities. But more than anything else, it luck which decides whether a day trader makes money on any given day or not.
What Characterizes A Day Trader?
Keep in mind that a day trader believes in the saying that all is fair in love and day trading. Right from holding positions on long trades (buying first at low prices to sell later at higher prices) to short selling (the exact reverse of long trades; selling first at high prices in the hope/wish to cover up when prices fall later in the day) to speculating wildly, unperturbed by the fundamentals and hardly, if ever, giving a glance to the technical aspects of his trades.
Let’s see other character traits of day traders:
1. They want to go back home with clean ‘slates’
2. They hardly listen to rumors, which are often in abundance
3. They are strong analyzers of anything and everything
4. They are not swayed by market sentiments
5. They are active in both the bull and bear markets
6. They are strong in math; thrive on knowing the latest new regulations, trading fees, taxes, etc.
7. Day traders are not bothered by the movement of financial indicators (NASDAQ, DOW JONES)
Would You Like To Be A Day Trader?
You can become a day trader upon opening a trading account with either a brokerage company or your bank, if it allows trading, or even with a stock exchange. There are legal and commercial formalities to complete before you begin to trade on a particular exchange. You can choose to become a day trader in any of the following.
1. Stock, bonds and securities
2. Forex (Foreign Exchange Currency)
3. Commodities (Metals, oils, food grains etc.)
But just becoming one will not make you a day trader of excellence. To put it rather crudely, you have to be looking at making your money in much the same manner a leopard pounces on his meal. Nothing else matters to you when you buy or sell. You don’t get emotional even when your stocks are not doing well. Instead you will decide to recoup quickly.
What Should Trigger You To Buy Or Sell
You can’t afford to make a mistake; risks you take convert into actual earnings only when you respond to 2 things quickly:
1. Liquidity (Volume of trade which decides whether you can enter or exit when you want)
2. Volatility (Price fluctuations to decide the number of trades on a particular stock, either to short or long sell and the price of trades)
At the day’s closing, your position is back to zero and you either walk out laughing or crying. As a day trader, you live to die another day.
Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solution’s Six Sigma Online ( http://www.sixsigmaonline.org ) offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts.