Tips on Becoming a Successful Day Trader

If you are going to invest the time and effort needed to become successful at day trading, one of the first things you should do is master the lingo. Much like doctors and lawyers have their own language, so too does the world of the day trader.

Day Trading

The art of buying shares of stock with the sole intention of selling them on the same day.

The Professional Day Trader

The professional day trader is someone who makes their living and is licensed (with either a Series 6, 7, 63, 65 or 66). Keep in mind that these traders typically pay higher fees, and this is the reason why you must tell the regulators if you are a licensed professional trader. Day traders who invest their own money in day trading are not required to be licensed.

The Rules of Pattern Day Trading

According to Pattern Day Trader (PDT) rules, if you take 3 or more day trades within a 5-day period, you are considered to be a day trader and are then required to keep a minimum of $2,500 in your account. Many of those involved in day trading who cannot maintain this balance will have to trade at Suretrader/Tradezero or Prop Firm.

Swing Trading

Those who choose to be involved in swing trading hold onto their stocks overnight or over several nights. Yet these are still considered to be very short-term investments.

What is Stock Market Hours

The stock market is open Monday through Friday from 9:30 a.m. to 4 p.m., except for holidays when the market will either close at 1 p.m. or be closed for the entire day. There are such things as pre-market or after-hours trading, but during these hours liquidity is frequently low as there are typically not many buyers or sellers during these hours.

The Bull or Bullish Market

When the market is a “Bull” market, it means the market is strong and trending upwards. Some traders take this position on a stock they are trading in because they are expecting it to increase in value.

The Bear or Bearish Market

A bear market is a weak one in which traders are expecting the value of one or more stocks to decrease in value. Traders may sell off their “Bullish” positions or short-sell their investments.

The IPO or Initial Public Offering

Companies make use of the IPO by selling a set number of stocks on the open market to raise needed capital to invest in research, growth or their own investments.

Float

Once the IPO stocks have been released to the market, the number of available shares remaining on the market are called the float. Keep in mind the Float is the equivalent to a level of supply so the more limited the available supply and the more in demand they are, the faster they tend to move up and down.

The Share Buy Back

Once a company issues an IPO they can buy them back. When this happens, the supply becomes more limited, which in turn increases the value of the stock while at the same time decreasing the float.

The Secondary Offering

If a company chooses to offer more shares after the IPO, this is referred to as a secondary offering no matter how many times they choose to offer more shares. However, when this happens, it increases the Float and at the same time decreases their value.

This is just the tip of the iceberg when it comes the number of day trading terms you will need to master to become a successful day trader. Of course, you don’t have to learn them all at once; you can take your time and master them on your way to learning how to make a living in the world of day trading. We continue this in part two.

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