Day Trading for Dummies

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By: Anne Durrell

You've probably heard of day trading, but do you know what it is? Day trading is a form of rapid fire buying and selling of stocks and other financial products within the same trading day. With most day traders, all positions are closed before the market closes for the day. Stocks aren't the only thing day traders buy and sell. They also trade stock options, futures contracts, interest rate futures, and currencies.

A decade or so ago, day trading mostly belonged to professional investors and financial firms. But with high speed Internet access so widely available, day trading has become popular even among at-home speculators and beginning traders.

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If you're at the day trading for dummies stage, but believe that you might want to try it for real someday, there are some things you should know first. You need to know the basics of investing and trading. It sounds obvious, but people go into day trading without understanding the fundamentals and lose their money very quickly. You need to understand the markets well, and you need a continuously updated grounding in world events. Many community colleges offer courses in the basics of investment, and taking one - particularly if you're very new to investing - is a good investment of your time and the $30 or $40 it costs to sign up.

One of the most important concepts on the subject of day trading for dummies is that even if you or others refer to it as day trading for dummies it is a serious endeavor. It is not entertaining, or recreational like playing casino games online. It is fast paced, and it requires your full attention. Markets can change within minutes, or sometimes within seconds. During your set trading hours, monitoring the markets and your investments and making trades should be what you commit all your attention to.

Before setting up a day trading account, spend time practicing with a demo account (where you aren't trading with real money). Learn what the pace and the requirements are like. Even if you're not trading with money, commit to it as if you were. You need to get the best simulation possible of the real thing before trying it, unless you happen to have plenty of money lying around that you don't mind losing.

Here are two final principles on the subject of day trading for dummies that you should understand:

• Just because you can trade nearly any entity in any market around the world and around the clock doesn't mean that you should. Narrow your focus to an area you are interested in. You may find that you are more disciplined about keeping up with the markets if you focus on a particular sector of the market, whether it's something broad like the energy sector, or something more focused, like designer apparel companies. You're going to be spending a lot of time with your chosen sector, so you might as well make it something you won't grow too bored with.
  
  
• Discipline is vital to successful day trading. You have to learn not to become emotional during volatile market periods. You must be able to remain calm in the midst of market chaos. You must be decisive and you must not waste time second guessing yourself. That's one big reason why researching the markets and practicing with a demo account are important steps toward successful day trading, well beyond the dummies stage!

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