Online financial market trading is not merely a case of allocating funds when placing trades. It is far more complex and requires a keen understanding of how financial trading instruments (like CFDs) are intended to attract profits. CFD trading also requires an extensive amount of research, including fundamental and technical analysis to determine what the best market entry and exit points are.
Finally, it is also necessary to remember that, as confirmed by Barry Ritholtz, "when it comes to investing, there is no such thing as a one-size-fits-all portfolio." Therefore, even if you know everything there is to know about CFD trading, with particular reference to day trading, it is still vital to do due diligence on every asset before you trade on the asset.
Before we look at the specific day trading strategies that are recommended by Jones Mutual, let’s have a look at a succinct definition of day trading.
Day trading: A definition
Essentially, day trading is the opening and closing of a trading position, or the buying and selling of an asset, within a single trading day. Trades are not left open overnight.
Day trading is one of the most common trading strategies implemented throughout all financial market trading genres, especially CFD trading, stock market trading, and Forex trading. It is a short-term trading strategy that allows investors to increase profitability from volatile, fast-moving asset prices. The length of a trade can last from a few seconds to the length of a trading day.
As Justin Kuepper notes in his article titled "Day Trading: An Introduction", day traders provide two vital functions in the fiscal marketplace: They ensure that the markets are "running efficiently via arbitrage," and they improve the markets' liquidity levels.
By way of explanation, arbitrage is the concurrent buying and selling of an asset to benefit by creating an unstable price. And market liquidity represents the extent to which a financial market asset can be bought and sold in a short space of time without affecting the asset's price, or the prices of the other asset's in the same class.
Day trading: The best tactics
The first step to becoming a winning day trader is to open a trading account with Jones Mutual. Secondly, you need to have a keen insight into the daily market conditions, an ability to do due diligence on an underlying asset, and an understanding of how the different strategies leverage the daily market conditions to drive profit. Therefore, by way of an explanation, let's have a look at some of the well-utilised day trading tactics:
Knowledge is key
As described above, it is vital to have an intimate understanding of both the daily market conditions plus the current socio-economic and geopolitical events that are taking place. The reality is that the financial markets are influenced, both positively and negatively, by what is happening in the world around them.
They are also affected by each other. Each market opens at a different time during a 24-hour period so as each one opens and closes, and it influences the opening prices of the market next in line to open and close. For example, markets in the Asia-Pacific region open first and the markets in the Americas open last. All the other markets open at times in between these two extremes.
Stick to your strategy
It is never a good idea to change strategies mid-trade. Carefully plan your trading tactics before you open and close your trading position. Also, careful planning and sticking to your strategy make sure that you do not trade on emotion; which, in turn, will prevent large, unnecessary losses.
Scalping is a technique that places a large volume of low-value trades with very short time frames. By keeping the value of each trade small, you are reducing your investment’s exposure to risk, and to the loss of large sums of money. On the other hand, the short trading time frame increases the trade’s risk profile. These two principles balance each other out and, if you do your homework correctly, the nett effect should equate to an increase in profitability.
Use stop losses
Even the most well-thought-out trades can go wrong. Therefore, it is critical to add stop losses to each trade to prevent the loss of your initial investment should the underlying asset’s price move contrary to your calculations.
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