Aspiring traders everywhere want to know if it is still possible to make a living as a day trader. The straightforward answer is yes, of course it is possible. According to BusinessWeek.com it is possible for some people to learn enough about day trading to succeed at it before they lose all of their money. To be completely aboveboard with respect to the question requires that one acknowledge that it is altogether unrealistic to assume that the average person possessing zero experience at day trading will pick it up and immediately become successful at it. We can extrapolate from this assumption that those day traders who are able to earn a living at it possess a certain unique skill set that sets them apart. In other words, to make a living at day trading one needs to have education.
The very first step one should to take in garnering a day trading education is to banish forever the notion that prosperous day traders only trade stocks. Stocks are wonderful trading instruments, but they are by no means the only game in town. Over the years, great numbers of traders learned how to make consistent profits trading stock and index options, commodity futures contracts and foreign currency contracts. Different instruments possess different characteristics, and place on traders demands that are at variance with one another. Common stocks are suitable for day traders that are well-capitalized and content with working regular business hours. Options and futures are appropriate for traders that are comfortable with the risks associated with the use of leverage. The spot foreign currency market is open 24 hours five days each week and is convenient for those who like working odd hours.
Secrets of the Day Trader
Profitable day traders are able to stay in business because they have developed a system that works for them, and they stick with it. The vast majority of day traders use some sort of technical analysis methodology that gives them confidence that they can identify points of supply and demand imbalance within the markets they trade. Day traders by definition are likely to get in and out of the market several times within a single trading session. Having a technical analysis methodology is critical when your time horizon is so very short. Day trading systems were developed to establish the criterion used to justify entering or exiting a trade. Signals are generated by the price action of a traded asset and collection of mathematically generated indicators. Some day trading systems employ multiple moving averages. When one moving average line crosses over another a signal is generated. When that signal is confirmed by one or more other indicators, the trader is instructed to take action. Traders who use such systems believe that they are helpful in taking emotion out of the trading process.
In addition to their technical analysis skills, prosperous day traders are masters at understanding the concept of support and resistance. Simply put, support is an area on a price chart where buying pressure is sufficient to digest selling pressure so that price finds a place below which it will not fall. The reverse is true for resistance. Support and resistance signals are highly reliable, and they work well for every kind of market instrument traded.
Contributors at Investors.com suggest that the work of the trader is pure speculation and that earning a living at it requires having an edge. The professional trader’s edge is an unshakable dedication along with a set of skills developed across time that works to skew the odds of a successful outcome in their favor.
