Introduction To Day Trading - First Steps And Rationales
An introduction to day trading can start with studying the core techniques used in day trading, namely those based around technical analysis. The reason technical analysis is used extensively in day trading is because day trading is short term speculation, by definition, it is not based on buying markets with the idea of letting growth change their value upwards. In fact day trading tends to be focused on markets which do no evidence growth per se, such as the Forex market. That is holding a longer term Forex position may be counterproductive (though it is possible), but day trading it may be more in tune with the way it traces out patterns of value.
This though means that day trading is hard, as it requires dealing with the myriad influences which change value in a market, such as a Forex pair. Technical analysis is attuned to this reality, as it seeks to find order within complex movement. This said, technical analysis and its signals can be wrong, and the trader cannot rely on technical analysis to produce an accurate projected outcome (for example a direction) for a trade. Day trading market retrace and indeed can move in a given direction, in moves composed of retracement in the opposite direction, which is another factor making reading the chart now (versus in the past) hard.
So the trader can read a book or books on technical analysis and day trading. This provides a theoretical introduction. But what about a practical introduction. The trader can open a demo account at a broker. On this they can learn how to use the platform then trade the market, simply attempting to take positions which move in the traded direction. The reason to use technical analysis, despite its inaccuracy, is so that the trader can have a rationale for entering, managing and exiting a trade.
It is possible to trade without using technical tools such as indicators, for example trading on candlestick charts, more general patterns and/or value levels, but this is also technical analysis, as it assumes like all technical analysis that the clues to direction are contained in the chart. However the chart is determined in effect by fundamental data. While fundamental data is used extensively in longer term Stock trading, it can be problematic on day trading time frames, simply because there is a lot it to and many other factors (such as traders trading) which buffet the moves in value of markets in ways significant on these time frames.
The trader may wish to start with a simple moving average, then progress to an indicator such as RSI and MACD. The trader may note that the rules governing these indicators can frequently result in wrong trades. There are many reasons for this, including that indicators indicate they do not predict. Indicators may be allied with 'softer' technical approaches such as value levels and patterns, to try and provide firstly an understanding of what is happening in the market, then a possible outcome for what is happening, which can be wrong. As trading with robots can be seen as an advanced strategy, the trader may wish to start using these if they wish to, after learning more about analysing and executing their own trades. However, the trader can use social and copy trading, if they feel like augmenting their own analysis and trades with the ideas and trade execution of others.
