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What is Day Trading?

Stock trading in general is not exactly an exchange of stocks but more of buying and selling of stocks with the goal of making a profit in between. Day trading, one form of this, is a similar process, only it takes a shorter time for a day trader to complete the buying and selling. In the morning when the prices are low, a day trader would buy stocks, which he would later sell when prices are high so he would earn a significant amount of money. It is a short-term process that involves fast paced decisions and choices.

This type used to be available only to financial companies such as banks because only these institutions had the access to market date and exchanges. Fortunately, with the advent of the Internet technology, such as information can now be accessed by individual traders at very low cost.

Day trading comes with different styles. Each style is suitable for different day trader personalities. One style involves a short-term process called scalping. In this method, positions are held only for a few seconds or minutes and are sold immediately when the right opportunity comes. This is suitable for day traders who are in for the adrenaline rush and who are capable of making crucial and effective decisions at the blink of an eye. This type is not ideal for the faint-hearted or for those who easily gets attached to things.

Another type is the longer term, which is also known as the swing and position trading, wherein a position is held throughout the trading day. While this is not suitable for the faint-hearted as well, at least it can give the trader more time (compared to the scalping method) in terms of making decisions. This is appropriate for traders who need at least a day to think things over and who have the patience to wait until the market closes later that day.

A great thing about this type of system is flexibility. The fact that you have the opportunity to hold your stocks from a few minutes to a few hours to an entire day, depending on your style and personality, gives you a wide range of options. But often, many traders choose to go for one single trade style to be able to get used to it and get the hang of it more effectively.

Aside from styles, there are also various kinds of trade such as trend trades, counter-trend trades, and ranging trades. The first one refers to those that are in the direction of the current price movement. One example would be buying if the price is moving up. The second one, meanwhile, is the act of moving against the direction of the current price movement such as selling if the price is moving up. The last type refers to trades that go back and forth between two prices. This style is used when the market is moving sideways.

Day trading can be a profitable industry if you know how to play your cards well. Before you jump into this unknown territory, just be sure to learn the basics on how to stock trade and study extensively about the ins and outs of the market so you won't lose your way around.

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