Market Factors Affecting Day Trading
Day trading of financial instruments such as stocks, futures and forex currencies demands quick response to ever changing market conditions. As with any other trading style, in day trading it is more important to preserve your capital from huge losses than to make huge profits from market. A day trader should be aware of fundamental forces and factors which drive the market up and down. Below are some of those important market factors.
1. Performance of Oversea markets: Every market responds positively or negatively to changes in other markets. The opening hours of US and Canadian stock markets are greatly influenced by the performances of European and Asian markets which have (almost) finished trading for that day.
2. Domestic and Overseas Economic News and Data: Day trading includes profiting from very small price changes, and thus any big or small news about a company, market, person, policy change and government can greatly affect any profit making opportunity.
3. Opening Hour Trader Rush: Opening hours of almost all markets is characterized by greater trading volume and volatility. Almost every trader, including individual and institutional traders, wants to react to the news that they have at market openings. There are days where the first hour trend is corrected later on the day and there are also days where the first hour trend is propagated later.
4. Price Changes of Futures Contracts: Spot prices of stocks and currency pairs keep a relationship with futures prices, and vice versa. Whenever the futures price increases, the spot price also increases. Futures trades starts before stock trading and price changes of index futures can be taken as a major indicator of stock market trend changes.
5. Analyst Reports and Ratings and Economics News: These are the major factors which contribute to the price changes after the first hour rush. Most traders try to go with the market and to quick respond to reports like company performances and to rumors.
6. The trading volume decrease at middle hours: The volume of trades decreases greatly at noon hours and the market moves sidewise; usually because of the shortage of new news and reports. Many times prices of instruments (slightly) decrease during these hours.
7. Afternoon Position Closing: Once the market approaches closing, many traders especially day traders, begin to close their open positions to reduce/avoid overnight position holding risks. The scenario is more evident in Friday afternoon hours.
As the forex market is continuous and is global, there is no such opening and closing hour rushes. But there is high volatility increases and decreases during trading hours of European, American and Asian markets.
By: NobleTrading
Article Directory: http://www.articledashboard.com
NobleTrading is an Online Trading Broker for Day Trading who offer deep discount commission structure and customizable direct access trading software for day traders. Online day trading brokerage service is available for trading stocks, options, futures and forex currencies.
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All of this study of the stock market can take a lot of time and effort and every now and then pays off. Although stock day trading can often result in large profits, sometimes it also results in considerable losses. Large losses are very frustrating especially considering all the time and effort that you have put into studying the stock trend.
But basically it is a software program – artificial intelligence I guess – that has been programmed to watch and chart the daily trends in the penny stock market. The program notices when a penny stock is on an upwards trend and will monitor it closely to see if has profit potential.
If you use a highly leveraged account, it is critical that you pay deep attention to risk and money management. Though a 1% movement in price hardly affects a long term investing account, in the game of scalping, that same 1% movement could mean a gain of 400% on your stake, or a loss four times greater than your stake. There is much to lose when scalping the markets, but just as much to profit.
There are many traders that scalp, and these professional traders have a knack for scalping the markets and generating huge results. But it doesn’t require a professional to do well with scalping; many small investors are finding it as an extremely lucrative way to make large amounts of money with small amounts of capital and trade from the comfort of their own home. Scalping is a great method for anyone, that is, if your nerves can handle it.
Through short selling, day traders can profit from stocks even when it looks like the price is on its way down. In every case, day traders will need to use a broker, and to pay very close attention to two basic indicators. These are the NDIX and the TDISC. At the beginning of trading on a particular day, these will tell you a lot about several different exchanges. They’re extremely sensitive to volatility, so if the market’s going up, the NDIX will rise by two thousand ticks or more in a half hour after opening. If it’s going down, the TDISC will drop by that much in the same period.
In addition to basic knowledge, you will also require a brokerage account. After all, one of the big tricks for day trading is short selling. This is when you borrow a share of stock from the broker you work with, then sell it right away. You’re planning to buy another share to give back to him with it comes due. When the price of stock goes down, you make a profit. Time things correctly and read the market right and you’ll find things working out well. You can also move larger amounts using leverage.
The stock picks are very good for day trading from my own personal observation and style of trading. Because I had a very modest account (another way of saying near broke) I stayed in front of my computer to monitor the trades and I noticed that some stocks picked by Marl the stock robot can actually do a shift of more than 40% in a matter of hours. But as I grew more confident in the predictions from the stock robot I was able to put in trades and not sit in front of my computer but instead set a take profit target and walk away. So just like everything else in life Marl will not give you 100% accuracy (dont bother looking because its not obtainable) but marl can will give you very profitable trades.