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How to Day Trade

An Overview

Scottrade.com defines day trading as "When you continuously buy and sell investments within a very short time period, perhaps a few minutes or hours, and rarely hold them overnight."

The primary factor needed to day trade is an online stock trading account. You can set up a Scottrade, E-trade or TD Ameritrade account quite easily by going to their websites and following the "set up an account" instructions. Also, according to Scottrade, you must load your account with a minimum of $25,000, a requirement for day traders under the New York Stock Exchange. Otherwise, your online account will be shut down.

After you have set-up your account and understand the different types of stock trading orders, you can begin trading. However, many groups including the US Securities and Exchange Commission would advise you not to "believe claims of easy profits," and to proceed with caution, understanding that you can lose a lot of money when day trading.

Insights from an Expert

John Visscher, a partner with Holloway Financial Management of Gainesville, FLA, gives his insights, on strategies and practices day traders should employ. He discusses some practices and strategies that day traders can use, if they do decide to engage in these risky trading practices. Visscher has been in the financial services industry for over 20 years. He prefers to look at investment strategies based on each individual investor, and thus, he has no magic bullet theory to investing.

Strategies to Use

There are numerous strategies employed by day traders, but Visscher claims that the most obvious and most effective is to "ride the momentum of the market, creating profits at your buying and selling margins." In essence, buy into a stock when you see its value increasing and sell it before its momentum ceases and the price falls.

Visscher also advises day traders to sell whatever they have purchased by the end of the trading session. "You may take some losses at the end of the day, but those will be nothing compared to the losses you take if you have bought into a terrible company whose stock falls overnight," Visscher said.

Also, USA Today financial markets reporter, Matt Krantz advises day traders to "to be prepared to move quickly and lock in gains when you have them, whatever the tax situation."

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Copyright © 2009 Matthew R. Beaton. All rights reserved