What are the Best Day Trading Forms – Pros and Cons
Many people are turning to day trading for an exposure to the financial markets and the internet is awash with lots of success stories of ordinary people that made their fortune from day trading. In the simplest of terms, day trading is the business of buying and selling securities within the same day. Day traders are different from investors as a matter of principle. Day traders can get in and out of the same/multiple trades tens of times daily in order to profit from small price movements.
However, many new day traders might find it hard to know which of the day trading forms should have their attention. Most of the vocal day traders tend to trade in stocks; however, you'll find many more people daytrading binary options and forex among other things. This article seeks to intimate you some of the commonest day trading forms so that you can choose the form best suited to your needs.
Day trading stocks
Day trading stocks is arguably the commonest day trading form in the market. As expected, people day trading stocks buy/sell stocks in order to take advantage of price movements that comes from the volatility inherent on the stocks. Day trading stocks can be done through different strategies but the usual ones are scalping, daily pivots, and momentum strategies.
With the momentum strategy, a day trader usually looks for news releases or trending moves that are supported by high volume of trades. The day trader stays in the trade inasmuch as the momentum sustains the pattern – they usually exit the trade once they spot a reversal in the momentum.
One of the major advantages of day trading with stocks is that you obtain ownership in a firm when you buy its stock. Hence, you'll still own the shares of the stock even if you lose money on the trade – the stock might recover at a later date and you'll be able to sell the shares to recoup your investment.
The biggest disadvantage of day trading with stocks is the information overload that could cripple traders. There are literally hundreds of thousands of stocks in the market and you might find it hard to know which ones to trade. More so, stocks could be affected by many factors beyond your knowledge or control.
Day trading binary options
Day trading binary options is another smart way through which traders profit from the financial markets. One of the great things about day binary options is that the binary options are available on a wide range of assets such as currencies, stocks, indices, and commodities among others. Day traders that trade in binary options buy/sell binary options in order to take advantage of price movements that comes from the volatility inherent on the securities.
In day trading binary options, you will place a trade on a yes/no proposition that the price of the underlying asset will be above or below a certain price by a given time during the day. One of the biggest advantages of day trading binary options is that you don't have to wear yourself out in stressing over complex trading chart and data. The trade has been overly simplified into a yes/no proposition with a definite payout if you are in the winning trade.
Binary options can be richly rewarding but some people are skeptical about how such a simple trade could be highly profitable. Newbies will do well to search out further information about binary options before committing their money to the trade. The disadvantage of day trading binary the range for binary options tends to fluctuate throughout the trading session and you might find it hard to get a firm handle of the market if you are not paying rapt attention.
Day trading forex
You could also profit from the financial markets by day trading forex. Forex traders trade currency pairs such as EUR/USD or GBP/USD in the hopes of using economic news and events to their advantage. Day trading forex is simply the act of entering and exiting forex trades within the same trading session. Day traders in the forex markets tend to adopt a strategy that allows them to trade in the direction of the trend so that they can buy low on a pullback and sell high on the uptrend.
One of the major advantages of day trading forex is that the forex market is a global market that is opened 24/7. Hence, you can trade round the clock in the real sense of the word inasmuch as you are able to work around the rush hour that accompanies specific currency pairs when different markets open. Another advantage of day trading forex is that their low barrier to entry for forex traders and you can perfect your trading skills without putting too much money at risk.