Monday, August 13, 2012

Day Trading, and Investing

Day trading is a misunderstood and often miss-used term. Day trading is the practice of holding positions open for short periods of time during the trading day with the goal of accruing small, but numerous, profits. Usually it means that you exit all positions at the end of the trading day and return to the market with a fresh slate the next day. What it doesn't mean is that you trade every day or that you open positions at the open of the trading day no matter what. 
When day trading, you will still need to keep basic trading principles in mind, such as picking good entry and exit points, placing protective stops, managing your money, and using technical analysis. And you still need to keep an eye on the news and on the overall trends of the markets.

Intermediate-term trading

Traditionally, intermediate-term trading means that you hold a position for several weeks to several months, which ultimately is impractical in the futures markets, where volatility can lead to margin calls and where leverage makes holding positions for extended periods extremely dangerous.
So, in the futures markets, intermediate is more likely to mean several days and is more often referred to as position trading, where you use a longer-term time frame as your reference point for keeping a position open.

Long-term trading

Long-term trading is impractical in the futures markets, unless you're extremely well capitalized, and you're hedging your business. When that is the case, however, you can use contracts that are several months to even years ahead as your positions as long as you're mindful of expiration dates and other parameters.