With the technology boom that has changed the way business is done across the globe, one unintended result has been the rise of day trading. Day trading is a risky and stressful form of trading that involved buying stock and selling it within one days time. It’s thought that if this is done enough time, with the right foresight and financial advice, that a person can make quite a lot of money each day. Day trading wasn’t even an option before the 1990’s. Here’s why.
Back before the computer age allowed instant stock buying and selling, the financial settlement period use to take much, much longer. It was possible to buy a stock, and not have to pay for it for another 10 business days. It was common practice in those days to try to sell the stock for more than it was worth before you had to pay for it in an attempt to make a profit. Many traders who had no actual money of their own would make their livings this way, and it’s obvious how dangerous this was.
A day trader has many different strategic options that he or she can follow to try to make a profit. The first is trend following. This is a tool that is used by all investors and its simply the idea that stocks that have been going up will continue to go up and stocks that have been going down will continue to go down. Obviously, this isn’t always the case, which makes trend following a dangerous method to base all of your day trading investments on.