Day traders buy and sell stock very rapidly within the course of the day with the hope that for the few minutes or hours they own the stock, the value would have gone up in their favor and they grab a quick profit. Day trading is not for the faint of heart. It is an adrenaline and tension filled activity. You can make huge profits during the course of a trading period, and you an equally watch your portfolio evaporate right in front of you.
A popular component of trading is margin trading. Experienced traders execute margin trades which when done well could be very lucrative. Before you engage in margin trades it is very important that you understand what you are getting into. Margin trading simply means borrowing money from your broker to buy stocks and paying back after you have made a profit. It allows you to buy more stock than you have the funds for. You trade with other people’s money and when you take profits, you have not risked your own funds. However, if your trades were unsuccessful, be prepared to pay the broker as ASAP.
Analysis of Stock
To execute trades successfully, you have to do some sort of research. To find out how the stock of the company has done in the past and use that information to predict if it would be good investment for you to trade on that particular stock. There are basically two ways to analyze stock, Fundamental analysis and Technical analysis.
This type of research involves looking at the core of the company and trying to predict the future of the company, i.e. if it will be profitable or if it can sustain itself and survive whatever problems it is facing presently. This would involve looking at the financial statements, the people than run the company and the type of products or services that they provide, and try to determine whether they would be relevant in the future.
This is a totally different approach to analyzing a stock before you trade. It is at the other end of the spectrum with fundamental analysis. It does not care about who runs the company, what product or service the company provides or its financial report. All it is interested in is the stocks price movement in the stock market.
With technical analysis you try to determine the direction the price of the stock will assume in the future, by monitoring demand and supply of the stock in the market and previous trends of the stock in the market. Today, there are softwares in the market that can accurately predict the analysis of stock based on an algorithm and some people swear by them.
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