Day Trading Basics: Choosing a Market and Deciding When to Trade

A day trader is someone who purchases and sells assets or financial instruments within the same 24-hour trading period. Some people even buy and sell multiple assets throughout the day to help them build as much potential wealth as possible. The whole purpose of day trading is to make fast decisions about stocks so that you can take advantage of a volatile market. Learning how to day trade is no simple feat. Most people who get into the day trading market can’t simply engage with their stocks on a part-time basis. That’s why there are so many people out there that end up giving up their jobs to day trade full time. However, before you hand in your notice to become a full-time day trader, it’s important to know exactly what you’re getting into. Here are some tips on choosing a market for day trading.

Choosing a Market for your Day Trading Strategy

Typically, day trading is associated with markets that have fixed closes. In most circumstances, a day trader will be able to trade in any asset, including commodities and stocks. However, choosing the market that you can get the highest return on investment on will depend on numerous factors, including what you feel comfortable trading, how much you can afford to spend, and how much time you have to put into your trades each day.

The stock market is a popular choice for many day traders as there are a lot of different shares to get involved with. It means that you have more variety to play with when you’re building your portfolio. If you get involved with the equity market, then you’ll need to close down your positions at the end of each day to make sure that you don’t face any gapping risks, when overnight news can suddenly change the nature of a stock.

Deciding When to Day Trade

When you’ve chosen the market that you want to day trade in, you’ll also need to figure out when you’re going to do most of your trading. Keep in mind that you don’t necessarily need to trade all day, but you should maintain a consistent pattern. For instance, if you decide to trade between 9 am and 10 am, then do that every day. This will help to give some structure to your strategy. The market you choose to trade in above will affect the times of day that are best for you to trade at. For instance, the stock and futures market are often best suited to trading early in the day, when you just wake up, or just before the markets close. Research the opening and closing times of your market before you begin trading to get the best results.

Alternatively, day trading forex is a different situation, as forex markets can run for 24 hours a day. The best way to simplify your process here is to simply focus on the specific hours of a currency pair. For instance, EUR and USD are the most volatile between the hours of 6 am and 5 pm GMT.