The process of buying and selling stocks in a single day is no longer a practice reserved for professional investors and financial companies. Technological advancements have opened the floor for the casual trader to expand their portfolio with intraday trading. Prior to intraday trading, in order to trade stock, one had to place their order through a stock broker. The order was then routed to an exchange floor specialist. The buyer and seller were matched together by the specialist, who then recorded the ticket that officially transferred the stock. A confirmation of the sale would then be sent to the buyer’s and the seller’s brokers.
Today, the casual investor is able to log in and build their portfolio through intraday trading without making a single phone call. There are various strategies involved in successfully navigating intraday trading. The article mentions trend trading, which makes trades based on the direction the stock is going, whether it is trending higher or lower. Once the trend turns in the direction you want, you trade the stock.
With contrarian trading, another intraday trading strategy, you trade in the opposing direction of the stock is trending. Since stock prices rise and fall a punch of momentum will reverse the stock’s direction causing is to reverse direction. You are buying based when prices may reverse.
With range or channel trading, you trade within an assumed channel or price range for the stock. This type of intraday trading interests traders that buy long at the lower end of the range and then sell short when prices are at the higher end of the range. Scalping takes advantage of inefficiencies in the market such as high trading volume that will provide fast profits. Scalping employs the use of technical indicators and spikes in volume to make back and forth trades that last a few seconds to a few minutes.
Another strategy for intraday trading, exclusively by day traders, is news events and rumors. With access to up-to-the minute sources, a trader is able to make instantaneous decisions. Rumors and news incites high emotion and volatility providing huge opportunities. Being able to anticipate the reaction the market will have to a particular news story is the challenge when employing this type of intraday trading.
Intraday trading has the potential to be very profitable because of quick returns and increased leverage. Yet it can also be very unprofitable when not done correctly. Due to the high risk, Day Traders have often been identified as adrenaline junkies or gamblers. For many, intraday trading provides a consistent profit and comfortable living.
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