Day Trading Takes Experience
Day trading is often a much debated subject. Can it work ? Yes, but only for those who have mastered the discipline and remain extremely discipline. In theory types of equities can be day traded. However, the overwhelming majority of market mavens are in agreement that day traders should stick with the more liquid names. Some investors who delve into day trading, often use their own research methods. They basically scour the internet, read research reports and form their own technical trading styles. Others simply subscribe to internet based services or participate as members in live trading rooms. Keep in mind that while both sources can act as great aids, they are not necessarily guarantees for success.
This is why here at Pennystockexplosion.com, we are not a day trading website, but we do try to map out some sort of game plan when we issue alerts. For instance we frequently highlight the perils of buying penny stocks that gap up in the AM. We also try hammer the strategy of taking smaller profits into the heads of our subscribers, instead of always trying to hit home runs. Being uninformed and greed are some of the biggest factors proved in studies that show that the majority of day traders lose money.
We are also going to touch on the subject of day trading more frequently than we have in the past couple of years. Mainly because history has shown us that day trading activity usually wanes when the market is flat to down. And right now might be a good time to brush up on the style, because many feel this market could turn higher soon.
Before you act though, here is an important point that most overlook. In my opinion, this factor is not discussed as often as it should be, and rivals the importance of being well funded and properly informed.
Day Trading is Intensive Work
The question is pretty simple and can be answered easily. Do you have the time to trade for 5 or 6 hours a day. You would be surprised to see how many people answer yes, and fool themselves when they are asked this question. Many feel that they can properly watch intraday patterns while trying to perform at their day jobs. Others feel they can just enter the trade and follow up with buy and sell stop orders (Depending if you are long or short) and put their account on autopilot.
Neither strategy can work for the masses on a consistent basis, and here is why. People with intensive day jobs have far too many tasks to perform to properly monitor ever the ever changing news flow and technicals. For instance, do you think that a supervisor of an employee wants to see a 5 minute chart of Potash (POT:NYSE) up on somebody’s work station while they are being paid to write a proposal. There are just too many distractions at a 9-5 job to day trading properly. Plus, you potentially could be putting a solid income at risk by getting fired.
As part as trading on auto pilot, it can work because it often takes emotion out of the equation. However, it only takes one choppy market to chew up a trading stake. And with predetermined profit and loss levels entered after a trade is executed, you often see novice day traders not use common sense. Let’s say John Doe just bought 1k shares of XYZ at $22 and the trading system recommends to enter a sell at $23. Now let’s also assume that XYZ is now trading at $22.80, only .20 away from the sell target and bad news comes out of Europe and the markets start selling off.
Now for an astute trader who is actually monitoring this situation, he or she can simply sell the position or raise stop loss orders to lock in some sort of profit. This differs from the auto pilot trader who will not only miss out on the profit from XYZ, but will potentially be stopped out at a loss.
The moral of the story is to not get too serious about day trading unless you are retired, or have a cushy job with a flexible schedule.
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