Daytrading involves trading securities in the short term. In this case, the definition of short term is a few hours at most. It can also be about seconds and minutes.
Thus, daytrading differs from regular trading, for example shares and bonds . Shares and bonds often have a time perspective of weeks, months and years. Instead, one can describe daytrading as a trade where you buy and sell during the same trading day.
It cannot be understated that daytrading is a risky investment strategy, but in return there is a high reward if the process is successful.
After reading this article you will hopefully have gained a better understanding of what day trading is all about. In this article, we will take a closer look at, among other things, what daytrading is, which products you daytrade with and good daytrading strategies. We will also give you some daytrading tips, and tell you how to get started with daytrading!
What is day trading?
First of all: What is daytrading?
We also looked at this initially: Daytrading is trading in securities. But day trading is different from “regular trading” because the trading takes place in a very short period of time. It makes day trading stand out from other types of trading.
In the role of daytrader, the aim of the investments is to achieve a small profit with each and every trade. The idea is that the gains will accumulate over time, so eventually it will lead to a good return.
Although day trading goes quickly, it is a process that requires a lot of time. In other words, these are investments you have to spend time on. If you are not particularly keen on it, then we would advise you not to venture into day trading.
Products you can day trade with
There are several products you can day trade with. Here is a small overview of which products can be considered in connection with day trading:
- Currency trading (also called forex daytrading)
- Commodities (for example oil, gold and silver)
- Bitcoin and other cryptocurrencies
You can therefore day trade with different products. With that said, there is one specific product that stands out on this list. Shares are without a doubt the most common choice in connection with day trading. There are several reasons for that:
- There are many different limited companies that you can trade with (see a good selection at sBanken ). Day trading stocks gives people the opportunity to compare several stock companies.
- Shares in general have a large trading volume. In practice, this means that buying and selling shares at the desired price is much easier, compared to some of the other products you can day trade.
- Each individual investor can choose shares based on their own preferences, in connection with, for example, industries, interests and regions. If it is something that interests you, it will also be much easier to invest.
Good daytrading strategies
As mentioned, daytrading is not something you just embark on. This is something you have to familiarize yourself with.
If you want to become a good day trader, you have to put in real effort. This is an activity that requires both time and energy from the investor.
Regardless of what you are going to do, it is important that you have thought it through in advance. If the investment is to be sold, you should have made a plan for how it will happen in advance.
In connection with day trading, there are a number of good strategies that you can consider using:
- Use of the platform ‘s stop loss function (functions as an insurance against not going on a serious crash)
- Use of the platform’s take profit function (guarantees profit on small price fluctuations)
- Leverage/leveraging (a short-term loan that can be used for day trading)
- Shorting (making money on falling rates)
Daytrading is risky
There are far too many people who start day trading in the belief that it is easy money. Daytrading is far from easy money, and we really cannot emphasize enough that this is not for you if you are not interested in spending time and energy getting into it.
An important prerequisite for success with daytrading is that you spend the time and energy required to familiarize yourself with it. Otherwise, it is essentially a death sentence before you have even started. In the worst case, ignorance can ensure that you lose a lot of money – when the purpose of day trading is actually the opposite.
Many will probably also say that daytrading was much easier before than it is today. Part of the basis for this is because technology and algorithms play a much bigger role in today’s daytrading systems than it did in the past ( practice here if you know a little coding ).
Some may also claim that this is just something we say to “scare” people from starting day trading, but that is as far from the truth as it is possible to get. Daytrading is a risky sport, and it is important to be aware of that.
Get started with day trading
It is actually quite easy to get started with day trading. Such a process can be divided into four steps.
We have started with daytrading with shares, but the procedure will be the same regardless of which product you have chosen to daytrade with:
- Find and choose a trading platform .
- Create an account with your chosen trading platform and verify your account.
- Buy a share (use the platform’s search field to find the object you want to invest in). Press “Trade” and then select how much you want to trade for and press “Open Trade” to buy your shares.
- Sell your shares.
Day trading tips
Here are some tips that can come in handy in connection with day trading:
- Spend plenty of time building up an understanding of the market, as well as planning how to proceed in connection with day trading.
- Always think of a strategy in advance. A strategy that gives you the opportunity to accumulate several, small gains over time is beneficial.
- Pay attention to the brokerage of day trading, to avoid your profit being eaten up by it.
- Don’t be afraid to use the stop loss function.