Day Trading

A day trade is a position entered and liquidated during a single trading day. The techniques of time of day and daily,patterns, are put to use by the day trader. Day, trading requires extreme discipline. excellent planning, anticipation, and concentration. The need for a fast response to changing situations tends to exaggerate any bad trading habits as in other fields. the shorter the response time, the greater the chance for error. We will extend the idea of class-trading to systems and methods that may also be held overnight, but expect to limit the trade to about 24 hours.
To keep mistakes to a minimum, each day’s strategy must be planned in advance. It should focus on the most likely situations that might occur based on the nature of the current price movement. There should also be a contingency plan for the extreme unexpected moves in either direction. Making spot decisions during market hours m-ill cause more frequent errors.
Computers have caused the number of day traders who rely on systems to increase. and have created an entire class of screen traders. The steady- increase in automated exchanges, led by Germany’s DTB and followed by France’s conversion of Matif. is sending a strong message that electronic trading will dominate the future. The availability. of intraday price feeds and system development platforms, such as Omega’s TradeStation. have greatly increased the number of day-trading participants. Only, 10 years ago the best one could expect was to display standard indicators and moving averages on a real-time price chart. Now you can fully program complex trading strategies that combine more than one market and more than one time frame into a single package and display bus, and sell signals on the screen as well as record a historic log of trades. All of these tools have greatly increased competition among individual and commercial traders.
For the arbitrageur, computers have had an even stronger impact. Sophisticated systems at banks and large financial institutions consolidate data feeds that bring current transactions on every type of interest rate vehicle in even- maturity and major currency. Analytic programs can find issues that are outliers and show which combinations (called strips) can produce a riskless profit. For the individual trader. few of these opportunities are available, although they add liquidity to the market. Individuals, however. find it much easier to create spreads of different deliveries -within the same market as as spread between two related products. Stock traders can create sector baskets or look for performance differences within a sector. Spread trading and formulated values. such as the energy crack or soybean crush, can be improved using similar displays, Many of the opportunities that now seem so easy to see would previously. have been missed. This faster. more systematic response to the market allows traders to improve profits and reduce risk in anyday-trading method.