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Day trading and its history
Some of the brokers’ advertisements on the internet make promises about making thousands of euros, US Dollar or British Pounds with just a few hours of trading per day. According to economists, “day trading” is the kind of trading in which individuals are buying and selling financial instruments, such as stocks, currencies, options within the same trading day with the goal of profiting from small price fluctuations.
“Day trading” became famous especially during the period of the Dot Com bubble. The Dot Com bubble is one of the most known economic bubbles in history and is regarded as a period of excessive speculations that occurred from 1997 to 2001. This was the period that individuals and businesses started to use the internet with many new internet companies being founded to cover new areas of business interests.
Venture capitals moved to invest in the newly founded companies, anticipating that they will grow fast and could prove a good source of profits. The large size of available capital for investments, the increase in stock prices and speculations in shares by traders led to the form of the bubble. The Nasdaq Composite Index rose from 1,000 units to over 5,000 in four years. Media reports were showing traders who were making large profits by engaging in day trading.
The economic rule that dictates every bubble will finally burst was confirmed in 2001-2002. The bear market of these years included traders selling shares of internet companies and abstaining from buying new ones, leading the Nasdaq Composite Index from a 5,048-unit high recorded on March 10th 2000 and dropped to just over 1000 units in the beginning of October 2002.
The day trader’s characteristics
Day trading certainly isn’t the easiest kind of trading in markets, despite the fact that media and brokers who would like to attract customers, will try to present it like that. Day trading involves significant risks which the potential trader should learn about and build a suitable strategy that will allow him to avoid the consequences.
Day traders must have a thorough knowledge of the market. Successful day traders are mostly experienced traders as day trading is a speedy process and the amount of money being used for buying shares can be quite large. The effective implementation of a strategy requires the day trader to develop some characteristics. One of them is discipline which is a must for a day trader that would have to trade multiple financial instruments within a single day. For example, fluctuations in prices of different assets could act as a distraction and could ruin a well-prepared trading strategy.
A day trader should also be mentally strong and patient. Even successful day traders have to face losses in day trading as updates are coming fast and, sometimes, following them is quite hard. Announcements of positive or negative economic data could make asset prices edge up or drop, taking a toll on a trader’s portfolio. Day traders can have a day that losses are more than earnings. However, this doesn’t stop them from continuing to execute their planned strategy, waiting for the ideal entry and exit points.
Trading with STO
STO has set as a goal to offer an optimal trading experience to its clients. STO pays special attention to its clients’ education by arranging educational courses such as webinars and providing its clients with the latest market news reports. STO account owners are able to trade on the most active shares in the US, German and Italian stock markets.
Trading Forex and CFDs (Contracts For Difference), which are leveraged products, are high risk investments and puts your capital at risk. You may sustain a loss of some or all of your invested capital. Only speculate with money you can afford to lose.