Candlestick Trading Blog
June 13, 2008
Invest Money
Invest Money in Day Trading To invest money in day trading means to potentially profit from fractional increases in the stock market. Day trading is the buying and selling of stock throughout the day using technical analysis tools rather than fundamental analysis typically used in long term investing. It requires as well that you close out your traders at the end of the day each day. Day traders will look at a determined set of criteria when deciding whether or not trade a specific stock. The criteria that determine this are liquidity, volatility, and price transparency and they are discussed below. Day traders will look at the liquidity of a stock when they plan to invest money in it, with the understanding that if a stock is too thinly traded, then the market makers can manipulate the price too early. Liquidity is based on the number of outstanding shares on the stock market, the number of market makers, and the volume of transactions that take place on the market for a particular stock. Day traders want high liquidity for a stock that they are trading because the higher the liquidity, the more people trading that stock, and therefore the more opportunities to make a profit. In addition to the liquidity of stock, these traders will also analyze the volume of a particular stock. It is essential that a stock is traded at 250,000 to 500,000 shares per day in order to qualify for day trading. (Day traders usually have a minimum somewhere in that range). The higher volume allows the trader to buy stock or sell stock at a very large amount without deeply affecting the price of that stock. Stock volatility, as introduced above, is the predicted or actual price movement of the stock and is a very important element to day trading. It is defined as the rate at which the price of a security moves up or down. Large price swings are where the educated traders make money, the less educated lose money. Day traders look to invest money in those stocks that change price frequently over the span of one day, or in other words are highly volatile. If there is no stock price movement, (or little price movement), then there is little to no chance for day traders to make a profit! The last important piece to successful trading of this nature is price transparency, also known as market depth. Price transparency assists the trader to invest money through determining how much money they can make on a specific stock. This is completed through the gathering of information on the order flow of a stock. Day trading is an extremely risky way to invest money, however it you really understand what you are doing, you can make a killing! Study as much as you can possibly stand before you begin, and practice online paper trading for up to one year, before you begin trading with real money. You will lose money before you make money, so the key is to be patient, study hard and practice. Online Stock Market Reviews presented live via the internet by Stephen Bigalow |
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