Day Trading

Is typically believed to be an excessive high risk profile job in stock market. There are a number of categories in day trading which day traders needs to examine and depends upon the situation he has to develop his day trading strategy. No moment in stock market is identical and very often the stock market tends to move in opposite direction rather than in the way the day trader are hoping to move, and this is a typical experience which every day traders go through so it is called a riskier job, but still day trading plays an eminent role in overall stock trading i.e. because with the good thing of day trading the stock market is capable to preserve adequate liquidity in the market and are able to preserve adequate volume for maximum of the stocks. Liquidity and volume are the main elements of stock trading, devoid of which it will be an intricate task for every investors in addition to traders and also to stock market to function in a good way.

Usually day trading is a course of action of executing either buying-and-selling or selling-and-buying of stocks in same trading session. Day trading is normally carry out by day trader who brings in enough liquidity and volume in overall stock market and it is one of the most important subparts of stock trading. Maximum of the peoples (excluding professional day traders who are very less in number) tend day trading as a gambling market like casino, poker or hoarse racing and does not follow the basic and most important rules of day trading and gamble away maximum of their money is day trading. Professional day traders do not treat day trading as a gambling place but instead they treats this profession as small business and are always capable to maintain their high profit margin. No doubt that day trading is very similar to a gambling place but if you reliance more on your knowledge and proper strategy along with tremendous discipline than you are more likely to be able to maintain your profit margin in significant way while doing day trading.

For doing day trading the day traders does not require to hold actual delivered stocks in their stock portfolio but instead they can burrow the stock for conducting day trading. In other words the stock broker where the day trader have registered themselves for conducting stock trading provides day traders a facility by which day trader can burrow the stocks and can do day trading. Also many of the stock brokers provide day traders with facility of burrowing money from them. If a day trader has minimum required amount of $25,000 for conducting day trading in NYSE and he wants to execute order for $100,000 than Broker provides him with additional money that is required for executing that order, due to this high lending money by the Broker to day traders, the day trader can make big deal in day trading by executing large quantity of stock, the higher the stock quantity high is the risk involved and low the quantity of stock, low is the risk involved and profit and losses are also in the same order.

Genuine day traders are very professional peoples and they do not enter in the market at anytime or in anyway but instead they wait for an appropriate entry point to jump into the market and exist in the same way maintaining their profit margin. Their entry point is pre planned i.e. they believe that if the stock is moving in the mode they crave than only they compose their mind to penetrate in the market or else they stay away from the market in anticipation of a clear entry point is exist so no matter in which way they want to do day trading i.e. short (selling) the stock in a anticipation that stock will go down and then covering the day trading position by buying the same stock or else buying the stock in a anticipation that stock will move up and covering the day trading position by selling the same stock.

There are various different categories in day trading such as the day trading can be implemented for only a few seconds or for a few minutes or for only a few hours within the same settlement day and this is done by different categories of day traders. Not all day traders apply the same rule but instead many of them have their own different strategies in place for doing day trading and that strategy is applied by day traders as the day trading stock situation arises. Many of these day traders had gained a substantial knowledge through books, guidance from stock gurus and through experience.

Any new beginner no matter he/she is young or old, male or female anticipating starting this exciting home based career of online day trading should need to gather substantial knowledge and experience. Before going to start investing any money in this field, the beginner should first need to start it by doing paperwork. Paperwork is very good strategy for a beginner who wants to do day trading. Assuming as you are investing your money in stock, you write down all your stock pick entry and exist point of day trading on a paper by which you will be able to learn a lot and with the help of this strategy you will be able to make out the mistake which you are doing...you need to continue this strategy for at least 3 to 6 months. Once you are sure you are going on right track then start trading a very small amount of money in day trading, once you have got that confidence and experience and comfortness than you will be able to make a good profit by doing day trading.

Stock Market Overview

Stock market is a place where buying and selling of stock happens and the whole process is called as stock trading or stock investing. Fundamentally stock market is recognized as heart of each countries economy; in fact it is called as mirror of economy. Any unusual impact on economy puts a significant immediate effect on stock market. If stock market is able to give out consistent gain to investor, it shows a good sign of healthy economy.

Stock market performance is dependent upon the companies listed on stock market, in-fact if the stock market is performing very well, it becomes a chance for new companies to get listed on stock market via route of bringing their IPO, by which they can raise money, which they can use for their expansion plan or can use money to acquire new company or for any good reason by which the companies value will increase in future giving high returns to company owner as well as investors.

If companies listed on stock market are profiting good, it gives out a positive signal of healthy economy, which creates a center of attraction to local as well as large number of foreign institutional investor to invest their large amount of money. If more money comes into the market, it creates enough liquidity, which helps stock investors as well as stock traders to make more profit. If stock market is performing poor, it gives out negative impression of slowdown in economy which is bad sign.

With the globalization and increased standard of living of citizens it had become mandatory for government of every country to monitor and maintain their economy in healthy condition. A large amount of stock market performance is dependent on government policies. If the government policies are suitable to increase the profit growth of companies than it will show a healthy sign in stock market. Stock market is more active at the time of government announcement like budget, policies, regulations, etc

Other factors that impact stock market is increase of interest rate, increase crude oil price, unsafe global environment, and many other major external factors which might have adverse effect on economy.

History of stock market
The history of stock market is quite old. Centuries and centuries back, small amount of community traders come-up with an idea of stock trading/stock investing. With the development in technology, stock market also come-up with different look and developed ideas to conduct stock trading/stock investing and now a days with the recent development of technology, basically the internet which had brought a new revolution in stock market, many and many small retail investors as well as traders are able to do stock trading as well as stock investing from comfort of their home; and investors and traders with good understanding of stock investing and stock trading are able to make a good sort of money from comfort of their home.

Myth of stock market
It is having said that no one in the world, neither the stock market gurus like Warren Buffett, George Soros or Jim Rogers can predict the behavior of stock market but still these peoples makes consistent money through stock market by doing stock trading as well as stock investing because they are thorough with their stock market knowledge and adopts proper strategy which helps them to make consistent profit. Many of the experts also believe that stock market is a gamble market. A lot of time speculation plays an important role in stock market and it becomes a hard task for newbie to conduct stock trading or doing stock investing. Any euphoria in positive side makes a significant move of stock market in upward direction and it is good sign for many investors as well as traders to make a large amount of money, but if there is any negative significant rumors than it becomes a worst phase for stock traders as well as stock investors and particularly the small retail investors who are the worst impacted person in whole stock market. At many occasions millions and billions of money of stock investors are washed away in stock market due to any sudden significant negative occurrence and millions of the investor’s money is completely dried up in within few days due to this phenomenon of stock market, so having proper strategy and deep understanding of stock market is only a perfect thumb rule to make consistent profit in stock market.

Technical analysis of stock trading

Technical analysis is an important aspect of stock trading by which one can easily understand the direction of stock i.e upward or downward. Technical analysis is a tool mainly used by traders as compared to investors. Determining exact entry and exit in any stock is quit tough, but with the help of technical analysis one can easily discover exact entry and exist point in a stock in which traders or investors want to do trading or want to make investment.

Technical analysis had come up as an effective tool for many traders and investors for doing stock trading. Many technical analyses believe in price charts formation for conducting stock trading. With the support of price chart technical analysis determines the direction of stock, they can determine the exact bounce-back position of stock if the stock goes downward, and they can determine the exact reversal of stock if the stock moves upward. There are also various factors which fall under the technical analysis standpoint such as volume of the stock, moving average of price, overall sector performance, % of stock holding by big financial institution, mutual funds, per day, per week, per month, per year stock performance, etc. Technical analysis more believes in the same stock trends rather than undefined trends. If there is no clear trend pattern technical analysis loves to stop their stock trading or likes to remain out of market until a clear trend is form no matter how the overall market pan out i.e. move upward or downward.

More than investor, trader basically finds technical studies useful while doing stock trading. Fundamental analysis and technical analysis goes hand-in-hand. If there is significant fundamental change in any particular stock, an immediate impact is seen in stock performance and with the help of technical studies one can get a clear trend about the same stock. If at any point fundamentally stock is showing poor performance at that point technical analysis looks from fundamental point of view to a stock and makes his technical decision how big that particular stock will fall down further and same vice versa if the stock is fundamentally making good performance.

Fundamental Analysis Of Stock Trading

Stock trading is a very tricky task and one needs to be acquainted with how to do a fundamental analysis of whichever company in order to make a consistent profit in stock market. Fundamental analysis is a basic of stock trading or stock investing, which gives you a clear idea about the company from all aspect which might impact the business of any company either in positive way or in negative way. From investor point of view fundamental study of company and implementation of proper stock investing strategy can give high returns from your selected stock pick.

The first thing you should know and this is one of the main reasons that any rise in stock price is dependent upon the profit made by the company. The stock price is a reflection of profit and loss made by the company. Any consistent increase in profit of a company gives rise to increase in stock price and any decline in profit or loss made by the company gives rise to decrease in stock price, however at some situation this theory might be wrong as this could only be a temporary phenomenon appear to that company due to some external factor or internal factor that needs to be taken in account.

What is Fundamental analysis?
Fundamental analysis is a study done on a company to find perfect view about the company’s overall past performance and future growth prospectus.


The some of the points that comes under fundamental study is described below but are not limited to following.


Business Category:
Knowing the business category of company is more important for a stock investor to do stock investing. Investor usually looks in which business category the company is conducting business. There are several categories such as Information technology, consumer goods, commodities, cement, agriculture, auto, auto ancillary, hospitality, tourism, construction, telecommunication, finance, airlines, shipping, etc.

Investor who has a medium to long term perspective usually makes a correct view about the future prospect of the company by determining in which business category the company is happens to be. With the season changes, external factor, government decisions or any other internal or external factors various business categories are consistently impacted either positively or negatively so taking all the factors into view investors has to make his investment decision and time horizon. The company that captures, protects and manages intellectual property effectively can expect to profit from greater net revenue and higher market value. Companies which are aggressive in their particular business category, making innovative things, doing lot of research and development and are eager to make their policy changes according to the situation arises are mostly thought to be a winner and can make consistent profit and can rewards their shareholder also with that.

Profits/Loss or Bottom Line Growth
With the growth of internet it is now achievable for every investor to take a look at company website for their quarterly result. It has been mandatory for every company listed on stock exchanges to declare their quarterly result. The quarterly result clearly shows the overall performance of the company i.e. company is making profit or loss. If the company is consistently making net profit it is a positive sign for stock trading or investment.

Sales Growth
Same like profit/loss, investor can also review at the sales figure of the company and can compare that with the peer group for getting an exact idea how well the company is achieving big sale or loosing their market sale. Company which shows steady sale or increase in sale indicates a positive sign for stock trading or investment and will have a positive impact on stock valuation.

Market Capitalization
Market capitalization can be determined by the current market value of the company's shares which is the total number of shares multiplied by the current price of each share. With the help of market capitalization investor can determine in which category size the company happens to be i.e small-caps, mid-cap or large-cap.

Management Team of a Company
The management team plays important role in any company’s overall performance. Company growth depends on management decision and execution process along with the future guidance that company management predicts in coming days. Investor makes a careful look and reviews the management capability in future growth of the company. An efficient, trustworthy and integrity management team indicates a positive growth sign of a company and investor finds no harm in making investment in such a company.

Volume
Volume is an indicator from fundamental and technical analysis point of view. Investors as well as trades usually prefer doing stock trading or to do investment in high volume stock as it protect them from any future uncertainly if happens in the stock. If investor or traders want to buy or sell the stock, due to more volume their order is executed easily and fast. Low volume stock usually are traded infrequently and large selling and buying of stock cause the price to rise or fall significantly which involves high transaction cost. More the volume indicates more amount of buyers and sellers which help both the side investors and traders to execute their order in low transaction cost. Volume is also an indicator of the liquidity in a stock. Low volume illiquid stocks tend to carry large spreads i.e. the difference between the buying price and the selling price. Volume is a key way to measure supply and demand, and is often the primary indicator of a new price trend. When a stock moves up in price on unusually high volumes it could indicate that big player like institutional investors, mutual fund or a high net individual are accumulating the stock. When a stock moves down in price on unusually heavy volume, major selling could be the reason.

Return on Equity
Stock market guru’s believes that 20% and above earning is considered as a good return on equity.

Price-to-Sales Ratio
Usually investors prefer this number to be below 3, and preferably below 1. This measures a company's stock price against the sales per share. It is believed that a price-to-sale ratio above 3 roughly guarantees a loss while those below 1 give you a large amount of chance to success.

Earnings Per Share (EPS)
Along with other important factors from fundamental point of view, earning per share ratio is also that much important. It gives us a good understanding of company; it determines how much the company is earning for every share. Many of the investors who follow and believe in fundamentals look into EPS before purchasing that particular company stock. Earning per share is calculated by dividing the earnings (net profit) by the total number of equity stocks.

P/E ratio
Price-per-earning gives a better understanding how expensive or inexpensive a stock is. High P/E is said to be expensive and it clearly means investors are paying high price for a stock. Stocks with low P/E's are typically considered a good value. P/E ratio is derived as Price per Stock divided by Earning per Stock. For some investors high P/E ratio does not make any difference from investment point of view. If the company’s earning potential is increasing at higher rate; investor feels no problem paying high price for such a stock.

Debt-to-Equity Ratio
Debt-to-Equity Ratio find out how much debt a company has compared to the equity. The debt-to-equity ratio is done by dividing the total debt of the company with the equity capital. Debt-to-equity ratio more than two is believed to be more, but instead if the number is low, more the company is in safer side and is positive from investment point of view.

Beta
The Beta factor is a comparison with the overall index with a specific stock; basically it determines the volatility of a stock versus overall index. The higher the beta, the more volatile the stock is. Beta stock swings in contrary with the overall index, if the index falls, the stock rises and if the index rises the stock falls.