Day Trading Basics
The basics of Investing
via Day Trading are quite straightforward. Common questions such as
"What is a stock", "What is a 'ticker symbol'?," "What is margin"
and "What is shorting" are easily answered. Behind all these
basic concepts is the meaning of the "bid and the ask". Let's take
a look at order types, and then how these relate to the bid and ask.
The main types are-:
- an order to buy or sell a stock at the best bid or ask. A market
order WILL get exercised for you, and fast, but you might not
like the price! Of course, by then you have no choice but to take
the price and hope your day trade is in the right direction. If
the market is moving fast and you simply HAVE to get in, sometimes
a market order is the only way. The floor traders love market
orders from 'the paper' (i.e.off-pit traders) because this is
how they make most of their money. Try to use market orders as
little as possible. With a day trading spread betting account,
market orders are as dangerous as on a standard brokerage account.
- an order to buy or sell a stock at a specified price or better.
This is the day trading order of choice for day traders and indeed
traders of other types. If you are afraid your day trading order
might not get filled and are tempted to use a market order instead,
remember this golden rule, from almost EVERY famous trader this
century - "Never chase the market".. It is more important
that you get the trade on at the right price, than that you get
on at all. If you buy it too dearly, or sell it too cheap, chances
are you will regret it immediately.You will also be amazed as
you start to realise that intrabar volatility often causes excrutiating
pain to day traders who use anything but day trading limit orders.
Stop Order -
an order that becomes a market order when a specified price (the
stop price) is reached. Used mostly to protect a day trading position
from incurring larger than acceptable losses should the day trade
start to go the wrong way. A "buy stop" order is placed
above the current price and a "sell stop" order is placed
below the current price. Until you are VERY experienced, NEVER
open a position without also creating a stop to protect yourself.
How to read a Stock
You have probably
seen day trading stock info from various financial websites on the
net that look a little like this:-
· 122.00 p
Items like 'Open' or 'Prev
Cls' are obvious, but what does the rest of it mean?
- Last Trade:
This is the price and time of the last recorded trade in this
- Day's Range:
The distance between the high and the low for the day.
- 52 wk Range:
The difference between the High and low over the course of the
- Change: How
much the security has risen or fallen since yesterday's close.
- Bid: The best
current offer to BUY the security.
- Ask: The best
current offer to SELL the security.
- EPS: Earnings
- P/E: The price
to Earnings Ratio.
- Prev Cls: The
- Open: Where
the security opened this session.
- Mkt Cap: The
Market Capitalisation of the security.
- Volume: The
number of shares of this security traded this session.
- Avg Vol: The
average volume traded per session.
- Div/Shr: The
dividend paid per share.
- Div Date: The
date the dividend will be paid.
- Ex Div: The
date upon which the dividend will no longer be paid.
- Yield: The
dividend divided by the last trade price.
As a day trader these
items should be second nature to you. You should be aware of these
figures automatically for all the day trading stocks you are interested
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