Day Trading

Whether stocks move up or down, day trading can be profitable

By Mike Carr, CEO Gain Management

Day trading means buying and selling in rapid succession. The goal for day traders is to take a small profit from a large number of trades. Stocks trade as if there is a continuous auction with buyers bidding the price they are willing to pay and sellers asking for the price they will sell at. Trying to capture profits from the small spread between those two prices is the idea behind day trading. Technology is the key to success in this fast-paced pursuit of profits.

Direct access trading means that you see the exact same bid and ask prices that traders on the exchange floor see. Day trading firms offer this information to anyone with a reliable broadband Internet connection. Using the services of a direct access trading firm means you can sit at home and trade with the same tools used by traders on Wall Street and in hedge funds.

Day trading facts you need to know:

A cold and analytical approach to investment analysis is the key to success in day trading.
Having a plan and executing that plan with discipline are the simple factors separating day traders from success and failure.
Although great wealth is always a possibility, the truth is most day traders can make a comfortable living with a disciplined approach and a trading plan.
Direct access trading technology allows trades to be executed quickly through low commission day trading firms.

Day traders must study, study, study

Direct access stock trading pits day traders against market professionals. The professional has spent time learning what to do with the information. Successful day traders must do the same.
Try: Pristine.com offers seminar courses to help you get started. Check out MasterTrader.com for video tutorials and training sessions that demonstrate exactly what direct access stock trading means.

Start with a free paper day trading account

You need to be sure your day trading ideas work before putting real money at risk.
Try: Questrade offers a free account. To get a better feel for the work involved, an open source program, Merchant of Venice, allows potential day traders to test drive strategy software and paper trade.

Thoroughly test day trading ideas

Armed with knowledge, day traders need an edge. All the data provided by direct access trading firms needs to be stored and tested to find profitable patterns. This will require specialized software to develop a strategy.
Try: Blocks Strategy Trader Pack, from Worden Brothers, Metastock and AmiBroker are among the best day trading software options to help you get started.

Open an account with day trading firms

Because day trading requires a large number of trades, direct access trading firms offer low commissions. Deep discounters combine direct access stock trading information with low commissions. Other day trading firms take direct access trading to the next level and let you borrow money from the firm to day trade. The increased capital can boost profits or losses, so be careful.
Try: Direct access trading firms, such as Ameritrade, E*TRADE Financial, TradeStation and Interactive Brokers offer outstanding service to day traders. Hold Brothers and Bright Trading offer training and access to trading capital for more aggressive day traders.

Improve performance with day trading resources

Assuming you've done your homework and are ready to day trade, all you need is the discipline to do what you planned to do. Consider a day trading coach to improve performance.
Try: Rockwell Trading, Alexander Elder, and Ruth Barrons Roosevelt all offer exceptional day trading programs.

Study the markets - read everything you can find related to day trading, watch business news and review the headlines from real-time news services like Bloomberg and Reuters.
For day traders, there are no guarantees - if it sounds too good to be true, it probably is.
Day trading involves catching small moves in what can appear on the direct access trading screens to be chaos. Keep it simple. Figure out which stocks to watch, when you'll buy them and when you'll sell them.