Day trading brings to mind scammy get-rich-quick schemes and outlandish anecdotal evidence from the one person out of thousands who actually made money using whatever product is being endorsed. However, with day trading, the idea that those that can’t successfully do something instead teach it has never been more true, and it’s usually “taught” in gross exaggerations with advice that is foolish at best.
Exact statistics are unknown, but thousands of people do make a living day trading. You never hear about them because they don’t need to sell books to make money, and because their techniques will not work if anyone else knows them. Day trading truly takes advantage of crowd mentality in predicting future prices, and doing the opposite of what everyone else is doing.
Successful day traders make split-second decisions without becoming emotionally involved with the money they are trading. Just like the stock market, the net wealth of a day trader fluctuates constantly throughout the day, with the criteria for success being correct in your predictions more than 50% of the time. Margin trading is a powerful tool for day traders, allowing them to multiply tiny gains across hundreds or thousands of stocks to make the gains worth their time, but margin trading has also been the downfall of many starting traders.
Many short-term traders follow the efficient markets hypothesis, which states that after a short period of time to adjust to current events, all stocks are appropriately valued and contain all publicly available information embedded within the current price. However, people who make a career out of day trading need to also have some sort of current events feed to monitor the same news that fundamental traders are monitoring.
Traders need to respond quickly to relevant news in order to beat the masses to it, and to considering closing your positions until the patterns are more predictable again. Another stock tip is to specialize in one asset class, whether that is something traditional like the stocks or bonds markets, or futures or options contracts. Trading stocks online helps level the playing field for individual, at-home day traders, and gives you a better chance to compete effectively with the larger institutions.