What investors can learn from day traders

Along with the great progress of the stock market in recent years and high volatility, day traders are back in the game. Or perhaps never left.

In 1990, daily trading was everything, especially using strategies like scalping, which come and go in hundreds of transactions in seconds or minutes, aiming in small but quick profits.

Rather, scalping strategy is the choice of high-frequency traders (HFT), the ultimate intraday traders who use powerful computers to scalping for pennies within nano seconds. Those pennies could reach billions of dollars in profits each year.

Although small traders can not compete with these advanced computers, many single traders returned to markets using variations of sophisticated trading strategies.

Margin and "trader formations"

One reason day traders to get involved in financial trouble is because of the margin. Margin funds that borrow from your broker, is a useful tool if used properly, but very dangerous if used incorrectly.

Will have a much stronger force their purchase if you "day trader formations", which is anyone who makes more than four daily transactions for a period of five days. Unpleasant side: once trained as a trader of daily formations must have a big capital.

While most people have no, discipline, time and courage to trade full time, Trading occasionally can be a solution for many of you. Used in this way, day trading is just another strategy implemented in certain market conditions.

Strict rules

Although many people blame day traders that have too short a view of the market, they can teach you a thing or two. To survive, they follow strict rules. For example, one of them is to never let a losing position overnight (although some day traders will hold a profitable deal for another day)

To close a losing trade is difficult for many people who hope to share back to the level of the entrance. One way to reduce losses or to lock profits is to use stop loss, trailing stops especially. Trailing stops can be entered as a percentage or currency coverage, which adjust and pull behind appreciating stock price.

Example: You buy shares worth $ 25 and enter a trailing stop of $ 1. Each penny stock moves higher, trailing stop increases by a penny. If the stock moves to $ 27, for example, trailing stop is set in moving higher. If then the price falls to $ 26 ($ 1 lower) order is trigirana and becomes a market (or limit) is for sale. You can also set the trailing stop and 1% or 2%.

Unfortunately, while trailing stops are effective when the stock makes normal movements, they can not be trigirani in extremely volatile situations. Because if targets small profits, you might want to use "hard" or mental stops. In addition to trailing stop oreder, you can also experiment with floating limit stops orders.

However, what trading strategy using important to build a plan to follow, because without such are doomed to failure.