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Tuesday 14 October 2014

Why Day Trading?

Day Trading Investing and Position trading are the trading methods for wealth creation. People do swing trading and day trading for income generation. Swing trading and day trading attempt to capture short term moves in the market. A swing trader typically holdsa position for 2 to 5 days where as a day trader never holds a position overnight.

Short term traders make trading decisions based on the laws of demand and supply and do not care about the fundamentals at all. I prefer to day trade as there is no risk of overnight holding. Derivatives are highly leveraged instruments and it is very risky to hold due to gap up/down openings due to overnight news flow.

There are certain advantages to day trading compared to swing trading. The first one is reduced risk and stress as we are not holding the position overnight.The second major advantage is steady income. Losses are inevitable in trading and even the most efficient method will have draw down periods. For a swing trader continuous loss of 5 or 6 trades means a losing month whereas for a day trader it is just one or two days. Another positive is immediate results and better control over the trades.

If we are trading price patterns, it is always better to practice day trading in lower timeframes. Price patterns occur more frequently in lower time frames and we will be able to learn in a compressed time .Frequent repetition and more exposure will help us to develop the skill faster.

Definitely there are much more trading opportunities in lower timeframes. Price may open and close at the same level most of the days. For a trader of daily charts there are no opportunities but price may give opportunities for the day trader.

The day today market movements are mostly controlled by technical speculators. They are professional traders and their actions can be anticipated with some degree of accuracy if you gain some experience

But there are of course certain negatives. Day trading is not possible without watching the market live. It cannot be done as a part time profession unless you can arrange your day job timing accordingly.

Cost of trading is another major drawback. There are fixed costs like commission, taxes and brokerage to enter a trade. These costs are same irrespective of our trading style or holding period. Day traders are aiming for small moves and enter and exit trades frequently. Fixed costs may eat into the earned profit. Many day traders earn at the gross level but slip into red when costs are accounted.


Parag Patil is a technical analyst and trading system designer with stock excel programmer. I hope the articles and live chart of nse future and mcx on this Website will be as helpful and profitable to you . I try to update and post new articles tips everyday. My motto is to encourage the traders, so that they should able to understand the technique views behind the moment of stocks. I have deeply analyzed with many technical indicator with parameter and added to my amibroker afl. And even taken backtest report which is never being implemented. Any of the analyst expect me. Seeing all this you may understand that my views is more technical than commercial. If you are profited by my views I fill happy.

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