Techniques and Strategies
The techniques a day trader uses are technical analysis of stock charts or fundamental analysis of the daily news flow. There are many strategies based on the company earnings, based on other events, based on economic data or just on the movement of the stock price.
Another important parts of day trading is risk management. Traders can only work if they have enough money in the account. That means they are always required to keep a backup for a possible failure or losing trade. Risk management does adjust the amount of money to use depending on the profit and loss of the past trades.
One special group of day traders are so called high frequency traders. They hold stocks for less than a second and do many million trades in a day. Usually they use automatic computer systems to place trades on the market.
Advantages
One advantage of day trading is the chance of winning a huge sum of money from just one trade. If you are lucky you only have to trade for some minutes before your daily, weekly, monthly or yearly goal is achieved.
Usually, traders focus on method how they earn money. So they get very specialized on how the market moves during the day.
Disadvantages
The problem with day trading is, that it is not a business. It is a skill that requires many manual work. If a day trader does not trade, he does not earn any money. So no matter how much money he might have, the income is generated from doing successful bets on the stock market movement.
In bad times there can be long periods when a trader does not win a single trade. Those situations require strong mental skills to be disciplined and focus on every new trade made.
Day trading is a mathematical system of possibilities. If the trading rules are setup correct, the mathematical chance of winning is high. But like in any other industry there is no guarantee of success. So a day traders needs to stay in the game until success appears.
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