As a strategic principle incorporated into a trade plan that also includes sound money management principles, day trading has several beneficial aspects that can enhance a trader’s profitability.
Perhaps the main benefit of day trading as a strategy for speculating on movements in the stock, currency and commodity futures markets is that trading positions are usually only open when the trader is fully awake and alert. This means the day trader typically has a better chance of making quick and intelligent decisions that should help put them ahead of the game. This form of trading risk can be especially troublesome for traders operating in the currency markets that trade throughout each business day.
The day trader is especially fortunate to be able to completely avoid overnight exposure risk — as well as the added stress that such risk involves — since they traditionally close out all of their open trades before the trading day ends. Today’s Day Trader StrategyOne of the most common and destructive mistakes a day trader makes is to simply not follow their plans.
The 5 Stages of TradingPsychologists have created a model for assessing how people change their behavior.
Furthermore, day trading strategies generally require that all trading positions must be liquidated before the close of the relevant market on the day they were opened. As a result, a currency trader pursuing a day trading strategy probably means that they trade just during their local market’s usual business hours. Being alert should also help sharpen their trading reflexes and make them ready and able to act quickly to take advantage of new opportunities or to avoid looming potential losses.
Nevertheless, stock and futures markets often gap up or down at the market opening and this also reflects the overnight exposure risk that traders holding open positions overnight must face.
Also, trading during less liquid time frames can result in substantial order slippage and stop losses that are filled just before the market reverses in a trader’s favor.
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