Category Archives: Educational Material

educational material

Becoming A Successful Day Trader

By Tony Jacowski
Published: November 26, 2007

There are two types of day traders – scalper and momentum traders. The scalper buys and trades stocks within minutes, whereas a momentum trader buy stocks that fluctuate from high to low during the day. But at the end of the day, the ultimate goal of a day trader is to buy stocks and sell them at the highest possible value.

A trader should be knowledgeable in paper trading and risk management. Traders keep themselves updated by reading stock exchange periodicals. It is essential for a day trader to absorb the relevant information completely and regularly. New York Stock Exchange and the National Association of Security Dealers impose minimum margin requirements for day traders.

A day trader’s world is full of risk, where fortunes can change by the minute, depending on unpredictable market swings. Besides luck, the profit of a day trader depends upon how vigilant and fast they are. The trader’s analytical, as well as risk management skills also determines success. The element of unpredictability is evident in every aspect of their work, ranging from holding positions on long trades that involve purchasing the stocks at a low rate and selling it later at a higher rate, to short selling that involves the reverse of long trades. This involves selling the stock at high rates in anticipation to compensate it when the prices fall, to speculating without being bothered with the fundamentals and technical aspects of the trade.

Characteristics Of A Day Trader

• Believe in their efforts and do not pay heed to rumors.

• They have a sharp analytical ability.

• They are strong-headed people, who are not affected by the prevalent market trends.

• They employ a mathematical approach.

• They work towards understanding the latest regulations related to trading fees and taxes.

• Day traders are not affected by the fluctuation of financial indicators such as NASDAQ and DOW JONES.

Anyone can become a day trader by opening a trading account with a brokerage company or a stock exchange or bank, provided it allows trading. You need to fulfill certain legal and commercial formalities, before initiating trades. You can become a day trader in any one of the following categories:

• Stock, bonds and securities.

• Foreign Exchange Currency

• Commodities – such as metals and food grains.

In order to be a successful day trader you need to be very cautious about every step you take, since a single mistake can turn successes into failures. You need to respond to liquidity and volatility quickly. Though day trading is a lucrative career, you need to keep in mind that you do not become an experienced day trader overnight. It requires time and rigorous practice. If you want to pursue day trading as a career, then you need to practice on a trading website to gain confidence in the application of new techniques and implement them in your career.

Tony Jacowski is a quality analyst for The MBA Journal. Aveta Solutions – Six Sigma Online ( http://www.sixsigmaonline.org ) offers online six sigma training and certification classes for lean six sigma, black belts, green belts, and yellow belts

Great Forex website

A trader friend of mine recently recommended a rather useful website about Forex fundamentals. You’ll be able to see an analysis telling you where institutions are putting their forex dollars, influence from stock market in currency pairs, fundamental strength analysis, etc.

You should see the videos to understand this analysis but they are not difficult to understand. I like a lot the COT (Commitment of Traders). Take a look and surf the entire web:

PfxGlobal website

GDP (Gross Domestic Product)

A country’s GDP (Gross Domestic Product) is one way of measuring the size of a nation’s economy. The GDP is the market value of all completed goods and services made by a nation over a set time period. The most common method of working out a nation’s GDP is by using this formula:

GDP = government spending + consumption + investment + (exports ? imports)

To see a list of countries and their GDP you have visit the GDP List

The GDP numbers have a big effect on the currency markets, infact it can be one of the biggest market moving reports. The GDP is taken into consideration by central banks when they make interest rate decisions. Higher than expected numbers can often improve a case for a rate hike and therefore increase the demand for the nation’s currency, the reverse is also true.

FOMC (Federal Reserve Open Market Committee)

The branch of the Federal Reserve Board that determines the monetary policies. Like the Bank of England, the FOMC is made of of a board of governers, currently there are seven members.The FOMC meets eight times per year to set the fed funds rate, the discount rate. They also control the money money supply by buying and selling government securities. There is always speculation in the Currency Markets about what will occur in respect of interest rates prior to the news being released. The market will usually price in these expectations before the event, so if the news from the FOMC is inline with what is already priced in, the market may not move massively. It is often the case that a big deviation from what I widely expected (for example A shock rate hike) could move the market more, but not always.

CPI (Consumer Price Index)

CPI (Consumer Price Index)

Inflation, the tendency of prices to rise and keep on rising is measured in many countries by the the Consumer Prices Index (CPI). This official measure is calculated each month by taking a sample of goods and services that a typical household might buy, including food, heating, household goods, travel costs. The biggest tool government’s and central bank’s use to control inflation is interest rates. Different central banks have different inflation targets. If inflation is rising above these targets, it often suggests an interest rate hike is more likely. Interest rates are often the central banks and governments biggest tool in controlling inflation. Traders usually increase or decrease bets on rate movements accordingly. If the numbers deviate widely from expectations, the release can provide some big movements.