Day trading refers to buying and selling financial instruments within a short period of time, ranging from seconds to hours. Day traders seek to profit from short-term price movements and close their positions before the trading day ends.
Day trading strategies can be applied to a wide range of asset classes, including stocks, commodities, currencies, cryptocurrencies, and bonds. Day traders share the following characteristics:
Day trading is a trading style that can be used on a wide range of instruments. Similarly, the strategies employed by day traders can vary greatly.
Some day traders rely entirely on technical analysis, while others prefer to trade events and rely solely on price action to make trading decisions. Other traders may employ algorithms or expert advisors (EA), which may execute hundreds of trades per day with a holding period of only a few seconds.
Manual trading requires day traders to closely monitor markets and devote a certain amount of time each day to this activity. When day traders will be active is determined by their preferences as well as their strategy and the instruments they trade. If their strategy requires volatility and they prefer to trade the British pound, it makes sense to trade during the London session, when the pound is most likely to move.
First, you must prepare yourself and determine whether day trading is appropriate for you. While it is difficult to simulate the stress that can accompany volatile PnL swings (fluctuations in a trader's account balance as a result of changes in the value of their positions), a demo account will give you an indication of whether or not potentially monitoring the markets for several hours in a row and making quick decisions will work for you.
If you decide that day trading is for you, you must develop a strategy and spend time testing it in a simulated environment. Eventually, practice will lead you to the best trading instruments for your strategy. For example, if the strategy relies on high volatility, oil or GBP/JPY may be appropriate instruments.
A well-defined trading plan is always important, but it is especially important when day trading. Day traders are more prone to overtrading, so having clear risk management rules in place is essential. You can set a maximum drawdown percentage per day or a maximum number of losing trades before stopping and analysing what happened.
While day trading can be risky, it also offers several potential advantages for traders who want to participate:
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This information is not to be construed as a recommendation; or an offer to buy or sell; or the solicitation of an offer to buy or sell any security, financial product, or instrument; or to participate in any trading strategy. It has been prepared without taking your objectives, financial situation, or needs into account. Any references to past performance and forecasts are not reliable indicators of future results. Axi makes no representation and assumes no liability regarding the accuracy and completeness of the content in this publication. Readers should seek their own advice.
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