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Day traders enter and close
their trades in the same day. A day trader can be trading many
stocks within the day s trading session , but has no positions
open in the end of the day.
Stock scalping just hold a
stock for a matter of minutes.
The requirements for a share
to be considered as profitable for day trading and stock
scalping are:
-
Volatility
Volatility is a measure of the price movement of a stock over a
given timeframe.
It
is the main things that keep day traders alive.
A
simple calculation of the daily price range is enough to screen
volatility index for day trading.
The
stock s price is more volatile if the value is higher, which is
good to implement day trading strategy.
2.. Liquidity
Daily liquidity is the daily trading volume. Higher trading
volume can be either many traders trading small number of
shares or just a few traders with large trading activities. This
is something you need to discover, though it is not an easy job.
The advantages of day
trading
Able to start with smaller
shares or less capital but with faster return.
Not exposed to the unexpected
market effect in overseas market over the night.
Can implement close stop loss
techniques, which will reduced the dollar risk per trade
The disadvantages of day
trading
Stressful and time sensitive.
Require minute by minute
market monitoring.
Need the latest market data,
which can increase the data costs.
Smaller profit margin as you
have to pay brokerage cost every single day.
How trend trading is
different from day trading?
A trend trader can be holding
the stock from one week to one month, or even a year! Trend
trading which also known as position trading will let the market
determine till when he should be in the market. If you decided
to practice this trading strategy, you have to use technical as
well as fundamental indicators to decide when to sell the
stocks.
The advantages of trend
trading
Can collect dividends, and it
is real bonus too!
No need to consistently
monitor daily price movement.
Able to give more time for the
trades to be more profitable.
The disadvantages of trend
trading
Susceptible to unexpected
market event while you are sleeping.
Require bigger range of stop
loss order, as you are trading for longer period.
You can lose focus for
extended period of time, results to lose in opportunities.
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