Learn Stock Trading – Introduction to Stock Market Day Trading

One of the most fun things to learn when you learn stock trading is stock market day trading. It’s quite exciting because of the speed of the trades, but beginners beware. There’s some key things you need to understand before getting into this form of trading.

Stock market day trading is essentially buying a stock and selling it the same day so it’s a very short-term strategy. If you don’t want to put your money in the market and wait years to see any type of return, this method might be for you.

We all hear about those stocks that rapidly go up on a given day and think day trading will be an easy way to make a small fortune. But most experience traders would agree you would need to first learn stock trading basics before getting into day trading.

Day trading definitely isn’t for everyone because many might consider this to be almost like gambling because of the constant swings a stock faces on any given day. The best investors trade for the long-term they make sure the company will be profitable in the future.

Stock market day trading isn’t as easy as it seems because of these constant swings, it’s for the serious investor who can keep on top of things. It’s important to have a good trading platform with a good set up so you can execute your trades in the optimal time for you to profit as a day trader. A trading platform is a program that has a live feed with the current stock prices and lets you trade stocks. Having a good quality trading platform is an excellent way to learn stock trading.

Another key is to have a good exit strategy so you can maximize your returns. With the rapid swings, the day trader’s entry and exit strategy are crucial it can be the difference from being a profitable trader to a losing trader.

If you decide to go into stock market day trading, it’s important to know what’s going on in the market and not just relying on your platform. Understanding company financial statements and understanding a company’s profitability will speed up your learning curve to learn stock trading and separate you from the novice investors.

Trading Stock Market Gaps

For stock trading, a gap is simply an opening price that is either higher or lower than the previous closing price. A gap can occur on any time frame, from the short intra day time frame to the longer weekly or even monthly time frame. For our purposes, we will consider the daily time frame.

Some additional details on gaps will qualify the different types of gaps. A gap that occurs within the previous day’s price range is usually not as significant as one that occurs outside of the previous day’s range. Think about it, a larger gaps implies higher volatility and a better chance of a profitable trade and if you are not careful, a larger loss!

What causes a gap? When there is an imbalance between what buyers are willing to pay versus what sellers are willing to accept, market makers will move price to a point that balances out the demand and supply. Gaps in price often occur when a company comes out with better than expected earnings or unexpected positive news. Information like this will often drive a stock price higher on the open relative to the previous day’s close.

On the other hand, if a company announces poor earnings or an unexpected lawsuit going against the company, the company’s stock price can easily gap down on the open.

As a trader, your job is to access the likelihood of either a continued price move in the same direction as the gap or a reversal. One way to accomplish this is to do nothing. That is right, do not trade.

Instead, let other traders do the work for you. For stocks that gap outside the previous day’s price range, what I do is let the stock settle in to a trading range. I’ll give the stock a hour of trading then wait for a break either above of below the first hour’s trading range before taking a position. Assuming the stock drops below the first hour’s trading range, I am looking to take a short position in the stock.

With a short position in the stock, I will then place a buy stop order above the first hour’s high. This acts as protection against an unexpected move in a direction that is not profitable for me. At this point, I am interested in the stock moving favorably and doing so quickly. Assuming this example of a short position stays profitable, I will move my buy stop price lower as the stock continues to move lower. If not, the stop order takes out the position.

This is just one method of trading gaps in stock price. Sometimes the best course of action is to do nothing. If the stock has not made an obvious trading range in the first hour, then consider either waiting until a trading range has been carved out or just skip the trade altogether. Capital preservation for traders is of utmost importance. Skipping a trade means you get to come back later with your money.

How Any Stock Trader Can Make Trading Stock Markets Easier and Much More Profitable

Trading stock markets is one of the oldest and most popular methods of trading. Despite having been around for a long time, this doesn’t change the fact that many new stock traders have difficulty in making the move to a profitable trader. Stock trading is easy, or so it seems. Just pick a stock, place a trade and hope for the best. This is how most traders approach the stock market, but the truth is this style of trading stocks is akin to gambling. Are you looking for a real way to improve your odds when it comes to the stock markets and increase your chances of having winning trades that can be sustained in the long run? Any new stock trader needs to pay attention to both the trend of the market and the correct place to enter and exit trades. I’ll show you easy this is to do, once you know how.

Stocks, like most financial markets, have a tendency to trend. Stocks in general tend to trend up. This doesn’t mean that there will be periods where stocks seem to be in a constant downfall, but by their nature stocks trend up in the long run. Regardless of this, any stock trader needs to first correctly identify the trend in the stock they plan to trade. There are a number of ways you can do this. The most popular is to use a 150 or 200 day simple moving average. When price is above the SMA, the trend is up. When price is below, the trend is down. This is great for beginners as it makes trend identification extremely easy. However, a better method I’d recommend is that of gauging the trend by using nothing more than price action itself. This will take some time, and beginners may find this extremely difficult to do. If you show your stock chart to any six year old without indicators and ask them if the trend is up or down, there is a very good chance they’ll be able to correctly identify the trend based on price action and nothing more. They can do this because they know little to nothing about trading and their judgment hasn’t become clouded due to an overload of information.

Once you’ve correctly identified the trend, you need to find an optimal place to enter your trade. While in theory you could just enter anywhere, it is recommend that you find a spot where the price of the stock is discounted. What does this mean? It means that if the trend is up, you are looking to enter the market at a point which is lower than where price currently is. This basically means you need to enter the market on a pullback. The opposite is true for when the trend is down. You will need to enter when price has pulled back and is at a level which is cheaper than what the majority of other traders paid. Getting into the market at a discount level means you increase your chances by buying cheaper than everyone else. This means you stand to gain more profit and give yourself a trading edge.