Day trading is trading that focuses on short-term positions that close on the same day, by the close of the stock market. Day traders, logically, are traders who use day trading techniques.

Day trading is short-term trading of securities. A day trader buys securities and sells them over a very short period of time, usually during the day. In doing so, he tries to profit from small price fluctuations. In other words, it is all stock trading, buying and selling of securities that takes place during the day (as opposed to normal trading). These are positions that are opened or bought and then closed or sold after only a few hours, minutes or even seconds. A day trader is that investor who engages in intraday trading, attempting to profit through quick trades and small price movements.

Contrary to the common perception, day trading is an acceptable investment method for beginners, even with a small amount of money, due to its high capital efficiency and ease of risk management.

In this summary, we will present the basic knowledge needed to start day trading in Qatar, including its characteristics, attractiveness and differences from other trading methods.

Day trading platform in Qatar
Day trading platform in Qatar

Features of day trading

In general, day trading refers to speculative trading methods used by day traders and is designed to take advantage of small fluctuations in prices during the day to generate large profits over time. Most day trading is done using highly leveraged derivative products, i.e. in the form of CFD and Forex trading. As a result you can make huge profits or losses with small price movements.

At the same time, with intraday trading you can quickly incur very large losses.

The entire focus of an intraday trader is only on the day that the trade is taking place and he does not care what happens in the market tomorrow or the day after, so he must focus on the relevant time frame. Typically, intraday traders trade on 1, 5 or 10-minute charts. An intraday trader hopes to capture several quick movements during the day and should therefore focus on the charts that best illustrate the development of the situation as it occurs in a short period of time. Day trading therefore eliminates the so-called "overnight risk", as the position is not carried over to the next day.

"Overnight risk" is the risk that occurs when a trade remains open for an extended period of time. Day trading, which completes the process from order to settlement during the trading hours of the day, has the advantage that it is not affected by internal and external economic indicators and corporate indicators announced after such transactions close. 

In other words, day trading allows you to focus solely on share price fluctuations. On the other hand, in the case of medium- and long-term investments, the longer the holding period of a stock, the greater the influence and risk of stock prices, such as fluctuations in interest rates, exchange rates and corporate bankruptcy risk, as well as national and foreign economic indicators.

Choosing the expiration time of trading
Choosing the expiration time of trading

There are different strategies for day trading.

Trading in a trend means buying when securities prices are rising or selling when securities are falling. Trading is done under the assumption that prices will continue to rise or fall.

Scalping is the simplest method, but it is quite effective. It consists in setting a certain threshold for closing a position. This strategy is achieved by entering and exiting a position quickly in a matter of minutes or even seconds.

News based trading occurs when a trader buys when there is positive news, or sells when there is bad news. In this case, the trader has to keep a close eye on all financial and economic news that can cause a trend to move, especially a positive one. A calendar of significant events in the stock market and a table of the effect of these events on exchange rates will help the trader in this. This can lead to higher volatility and create opportunities with higher profits or losses.

A reverse strategy (reversal) is a trading strategy in which some traders intentionally go against current market trends, buying financial instruments when others are selling and selling when most others are buying.

News feed on the platform
News feed on the platform

Day trader

A day trader is a trader who completes his trade of the same day without carrying it over to the next day.

The biggest difference between day trading and long term stock selection is the psychological aspects. If you work with day trading, the mental pressure is concentrated in a shorter period of time than that which normally occurs with traditional stock investing. The pressure leads to fear and bad, or at worst, disastrous decisions which are immediately reflected in the account. Exchange investors also act less rationally under pressure, but are often unaware of their actual losses as the outcome of the trade takes a relatively long time to become clear.

To be a day trader, you must have qualities such as concentration, focus, high stress tolerance, the ability to work at a very fast pace and not react to short-term setbacks.

Many people who want to make money in the stock market think that it is easy and that all they have to do is find a strategy and then increase their positions when the profits increase and after a while you get rich. The truth is that it's not that simple. It's a profession, and like any profession, it requires a lot of learning. Reading a book or an article on the Internet won't make you a day trader. It requires constant self-education and acquiring new business knowledge. The stock market and markets around the world are constantly changing and what worked yesterday may not work today or tomorrow. Always try to stay one step ahead. There are many lessons and training courses on trading, so if you choose to learn about trading, you can easily find all the information you need. Also, if possible, try to surround yourself with experienced operators and communicate with them whenever possible.

Day trading markets

There are many financial markets that offer day trading opportunities. Each market has its own dynamics and it will take time to learn and understand the pros and cons of each market. Therefore, at least for beginners, it is preferable to become familiar with the market and start trading.

In the end, your choice will depend on what you are comfortable with and what you can afford.

Today's most popular markets are:

  • The foreign exchange market (forex) is the most liquid financial market in the world and the one that requires the least capital to get started.
  • Futures markets require more money than the forex market to open a trading position, but less than the stock market. In futures contracts, you buy or sell an underlying asset, such as a commodity or stock index.
  • The stock markets are more capital intensive. The deposit required to begin a day's trading depends on the requirements of your broker.
  • Commodity markets, where commodities such as oil, precious metals and industrial metals are traded.

Day traders will not have to actually surrender the assets they trade or settle in cash when the futures contracts expire.

Popular trading markets
Popular trading markets

Platform for day trading

An online broker facilitates your transactions and provides you with a broker in the investment market in exchange for a fee or commission. Choose a licensed, transparent and reliable broker that charges reasonable fees and is able and willing to help you with your trading needs. A broker will provide you with online trading software to make transactions over the Internet.

Numerous investment platforms are available for day trading. Your broker will certainly offer you to test the platform with a demo version. If you are not satisfied with the platform, try several and choose the one that suits your trading style. Remember that you may have to change your online trading software several times during your trading career. Your platform must include charting software as well as a selection of tools required for good-quality day-to-day trading. In addition, the platform must be user-friendly, informative and updated in real time. You should favour platforms which have a mobile version, this is convenient and you will be able to trade anytime, anywhere, just using your mobile phone.

Day trading platform
Day trading platform

How to register on the day trading platform?

Registering is relatively easy. Whichever investment platform you choose, the procedure is pretty much the same: you will be asked for a valid email address and password that only you know.

You will then be asked to check the "Terms of use and privacy policy" box. If you haven't already done so, take the time to read them before completing the registration so that you don't have to accept anything you're not comfortable with.

Once you have entered your details you will receive an email with a link to confirm your registration: follow the standard procedure and you can use the platform.

Registration on the platform
Registration on the platform

What is a demo account?

A demo account is a training version of a real account with fictitious money for training purposes. In fact, a demo account is the type of account a trader can use to practice their simulated money trading strategy. Practice the strategy until you feel comfortable with it. With a demo account you can trade at any time of the day, even when the respective market is closed. It is advisable to practice for at least three months or more before trading with your own money.

Ability to open a demo account for training
Ability to open a demo account for training

How to start day trading?

For real trading, you need to activate a live account. It is easy to do, all you have to do is to fund a live account with at least the system's limit. These limits are different on each platform, but most platforms allow you to start with small amounts, making trading accessible to almost everyone. To make a deposit to your live account, click on "make a deposit" and the system will redirect you to the deposit menu, where you will see all the options you have to make a deposit. Choose one of the options. The money is credited instantly, and you can use it immediately to make transactions on the platform. Withdrawals can be made using the same methods as deposits.

Deposit replenishment options
Deposit replenishment options

Tools for day trading

Thanks to the advanced trading tools offered by the online trading system, you can significantly limit your potential losses. The stop-loss and take-profit functions help you control your risk.

With a limit order you can specify a certain buy or sell price. When this price is reached, the trade is automatically executed.

Stop-loss and take-profit are a type of stock exchange orders (orders, orders). Traders use these orders to reduce losses and maintain profits. In short:

  • Stop loss closes unprofitable trades; 
  • Take profit closes profitable trades.   

Stop Loss and Take Profit are similar in that in both cases traders pre-determine the prices at which the system will automatically send these orders to the exchange. That is, both stop loss and take profit are pending orders. 

Stop Loss and Take Profit are indispensable features for the day trader. Sometimes prices fluctuate within seconds, and if you set a stop order correctly, you will not miss it, because the system has time to respond and react. Especially if you are distracted during this time, or there is some technical glitch on your side.

Using Stop Loss
Using Stop Loss

As noted above, traders use technical analysis to predict short-term market movements.

Technical analysis involves analysing market price patterns. When a day trader sees a clear pattern, it means that price is more likely to go one way than the other. Many patterns can be used by day traders as well as those who base their trading on a longer time frame.

A day trader does not read balance sheets or analyse business reports. Rather, he tries to use technical chart analysis tools and special strategies several times a day to take advantage of short stock market price movements.

Day traders who specialise in technical analysis trade with time frames that range from a few seconds to a full day. Technical analysis indicators come to the rescue. Choose a platform that offers these indicators. The most commonly used indicators are trend lines, support levels, resistance levels and moving averages.

Indicators for technical analysis
Indicators for technical analysis

How to become a successful day trader?

Day trading is a risky activity. Unfortunately, no one can guarantee you the success of a transaction by doing certain things. There are no precise guidelines as to how and what to invest in, what is the best term to choose, what financial instrument to prioritise. Nevertheless, there are general rules which, when followed, will greatly increase your chances of success. Here are some of them:

  • Your knowledge is your greatest asset. Become better at trading by deepening your knowledge from a variety of sources, such as the media, audio and video lessons, Internet platforms, books, blogs and forums. Also, do not be afraid to learn from your own mistakes.
  • The amount of your initial investment. Never risk more than 1% of your trading balance on a single trade, which is a proven principle in day trading.
  • A reliable computer or laptop with sufficient memory and a fast processor is essential in order for you to take full advantage of the investment platform offered by your broker. You should also have a mobile phone with enough data to back you up if you lose your internet connection.
  • Broker. Choose a brokerage company that offers the most suitable platform for day trading. The broker should be licensed and the platform should be functional, informative and suitable for you in terms of commissions.
  • Market knowledge. Follow the news and learn to analyse how events in the world of economics, politics, science, environment and so on affect asset prices.

Practice and hone your trading skills by using a demo account, and sooner or later you will see positive results.

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