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Day trading limits trading to the time period of a single day, 24 hours. A trading day can run at different times, depending on the market. Day traders can potentially engage in international markets based in different time zones, or in the foreign exchange market (forex), which is global and normally open 24 hours a day, 5 days a week.
Day trading means that all positions are closed by the end of the trading day. Potential profits and losses are thus tallied up by the day’s end, giving clarity to your financial position. As traders aim to exit the day on a profit, some positions may be closed before the day has ended.
Potential profits and losses from day trading depend on the financial value of your market position. These positions may be leveraged, which will magnify the volatility of the financial market in question. Although the time period is relatively limited, market movements can be sudden and unexpected, and often occur over a very short time period.
You can use spread betting and CFD trading in order to quickly access the markets. Financial spread betting and CFD accounts are subject to status but they available from a range of providers such as FinancialSpreads.com and IG Index . A common feature of a trading account is a desktop trading platform, although the web based platform is more popular.
As mentioned above, day trading limits your trading executions to a single day. This does not mean, however, that it is easier or more likely to result in profits. Achieving profits and sustaining them over a series of trading sessions is far from easy.
You can test your speculative skills by opening a demo trading account that lets you trade without risking any of your capital. You can refine a strategy through practice and by learning from both your profitable and loss making trades.
Technical Analysis and Fundamental Analysis
Analysis of the underlying financial market can help you refine your trading strategy. Day trading strategies can be developed according to fundamental or technical analysis, the two key types of market analysis.
Fundamental analysis depends on the belief that external events and factors can determine a market’s movement. Political events, for example, may boost or depress a financial market as traders gain or lose confidence.
In terms of day trading, a fundamental analysis strategy can be aided by regular access to news sources, such as news wires, online newspapers and other news or financial media.
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Technical analysis uses charts and is focussed upon the interpretation of historical price movements. Thus, if a financial instrument, such as a currency pair, has risen or fallen in the past, you may decide it will do so again in the future.
However this is also the key flaw in technical analysis, just because a market has moved in a certain direction in the past that does not mean it will continue to move in that direction.
Spread Betting and CFD trading are financially geared types of trading they carry high levels of risk to your capital and you can lose more than your initial stake. Always trade with capital that you can afford to lose. Before making any trades make sure that you fully recognise the risk when investing with these investment formats. It is important to note that Spread Betting and CFD trading may not be suitable for all investors. Where appropriate, seek independent advice.