Everyone has heard about the day trader glued to the computer and turning $100 investment into millions. It makes a great story but it just doesn't work that way any longer. In the old days, anyone with a meager investment, a computer and a brokerage account could become a day trader. The government stepped in and changed all that. Of course, they were protecting us from ourselves but it made it a little more difficult for those that want to be as aggressive as possible and watch their money grow rapidly.
Day stock trading is now often for those with ample finances but you can get around the regulations by adjusting what you consider day trading.
First day stock trading is buying and selling the same stock in the same day in a single account. If you do this more than four times in five days, you become a pattern day trader. Once labeled as a pattern day trader, you have to maintain an equity balance of $25,000 in your account or face the prospects of the having the brokerage house limit your account transactions to liquidation only until you reach $25,000 or up to 90 days. That seriously impedes the person that is just starting into day stock trading.
There are ways to avoid having your account closed and forcing you to meet the high balance requirement. One of them is never to make more than four day trades in a five-day period. Rather than taking advantage of small patterns, you can watch for larger movements over a few days. However, in order to do this, you need training in how these patterns occur and what those patterns look like.
Looking for patterns in the stock prices can be easier with the right type of program and a little background knowledge. It may mean trading the same stock every two or three days, which doesn't put you into the bracket of a pattern day trader. You do make just as much money with fewer trades and a little less tension.
Day stock trading is riskier than pattern trading. You have to wait for just the right moment to click that trading button. If you use the slower method of following patterns of price over several days and using the pattern for your profit, you simply need to place a limit order to buy or sell when the price reaches the peak or valley.
While this type of trading doesn't give you the same thrill as making money immediately, you can get your adrenalin fix in other ways while you wait for the orders in your account to take effect. You do have some important concepts, however, to keep in mind.
The first is that sometimes the market tricks you a bit and you'll notice that the pattern deviates. It might mean that you buy and sell in the same day, counting as one day trade against your account. When this happens, you have to become a little more cautious on the rest of your trades until that five day period expires.
Other times, either the stock drops like a rock after you purchase or climbs beyond reach after you sell. With the proper knowledge you'll recognize when it's about to break through the ceiling or floor and avoid making the fateful move that could cost much of your bankroll. In day stock trading knowledge and experience makes the difference between a failed attempt to make more money and serious cash.
Source : azinearticles
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