so today we are talking about day
trading and this is going to be like a
guide to what exactly day trading is and
hopefully by the end of this video
you're going to have decided whether or
not day trading is for you now I have a
camera that's that like 1/4 battery and
a lot of information to cover so I'm
going to try to breeze through this
without spending so much time rambling
on as I'm known for but anyways let's
get right into it
so what is a day trader well there's
generally two different groups when it
trader and this is someone who buys and
sells stocks and end the trading day in
cash with no open positions so they do
not hold any positions overnight
throughout the trading day they sell
everything they bought that day and they
do not carry anything over off market
hours then you have a swing trader which
is somebody who holds positions
overnight and generally for several days
possibly maybe like three to five days
maybe one trading week is about how long
you'll see a swing trader hold positions
most day traders are a combination of
these two things so depending on the
stock or the investment they are going
to be holding it for a couple of days or
they going to trade in and out of that
stock within the single trading day so
how do day traders trade what do they
actually do well first of all they use
professional high-frequency trading
platforms they use direct access brokers
they use very high-speed Internet
connection so you're not going to see
them using like a library internet
connection to be day trading they have
very sophisticated setups they have the
best possible internet internet
connection you could have they also have
the best possible trading platforms and
the fastest possible trade execution
because you have to realize as a day
trader even a couple second delay could
cost you hundreds for thousands of
dollars so they want to have the fastest
possible trading systems available and
they also use a multiple monitor setup
so they have a lot of different charts
and things on the screen they're keeping
track of throughout the day
now they trade based mostly on technical
stock analysis which is the charts and
data and day traders have little or no
concern with company fundamentals so
you're not going to see day traders
reading company earnings reports or
worried about the fundamental strength
of a company they're caring about the
volatility of the
we'll stock and what the chart is doing
and what they feel the stock will do
based on chart momentum indicators and
other technical indicators so basically
what a day trader does is they're using
charts and technical indicators to
determine the patterns of the stock the
volumes of the stock as well as the
price movements of the stock a common
technical indicators that day traders
use are resistance and support levels
moving average Convergence divergence or
MACD simple moving averages or the SMA
volatility price oscillators Bollinger
Bands Candlestick patterns and RSI which
is your relative strength relative
strength index now I'm not saying that
you guys shouldn't use these indicators
if you're not a day trader because I am
NOT a day trader I'm more of a long-term
trader but I do use basically technical
stock analysis to determine the optimal
entry point for a stock so I think it's
very valuable to understand both
technical and fundamental stock analysis
so you can kind of use a blended
strategy so it's not a bad idea to study
technical stock analysis and technical
stock indicators but I don't think day
trading is for the majority of people
who are looking to get involved with
trading in fact I would recommend it to
anybody and you're going to see why when
we talk about the success rate of day
traders so day traders utilize something
called leverage and what that means is
that day traders trade in a margin
account to increase leverage on a
position so high trading volumes because
they're trading in and out of stocks
mostly on a daily basis they're racking
up a lot in Commission costs and as such
you have to offset that Commission cost
in order to make a profit on an
investment so most day traders need to
borrow money in order to make a profit
so what they do is they create unmarked
you which basically means that they're
buying an asset where the buyer pays
only a percentage of the asset value and
borrows the rest on an interest loan
just like you're getting a loan from the
bank
now margin training is an entirely
different animal and it's something I do
not do it's a way to get yourself in a
lot of trouble in my opinion anyway
you're going to talk to some margin
traders that say it's the way to go as a
beginner I wouldn't recommend it to a
beginner I will never margin trade
myself I don't have the money to Front
for the investment not going to be
investing in
anyways so here is the basic day trading
strategy so most day traders make money
on relatively small price movements in
liquid stock so those are stocks that
trade at high volumes with mid to high
volatility so in order for a date trader
to make money on a day trades there has
to be some significant or at least
noticeable pricing with that stock so if
the stock doesn't change in value much
throughout the day if it's a low
volatility stock you're not going to see
many day traders trading that stock but
if there's a mid to high volatility with
that stock and it's going up and down
quite a bit throughout the day maybe
like a tech stock or a biotech stock
things like that which is a high amount
of volatility that's where you'll
generally see more day traders because
you need a price swing in order to make
a profit basically higher volatility
equals higher risk and the higher risk
equals greater price movement or swing
potential and then lower volatility is
lower risk which means there's lesser
price movements and swing potential so
they're in the higher volatility high
risk stock area because they need those
drastic price movements in order to make
money okay so day traders plan the trade
at least good ones anyway the failures
they may not be planning the trades but
a day trader plans the trade what they
do is they decide on an entry point for
the stock they decide on an exit point
from the stock and they also decide on a
stop-loss point which is where they say
no matter what I'm cutting my losses if
the stock falls to this value and I'm
calling it a day that way they can try
to minimize losses on some trade one or
two stocks a day and others create a
small handful of stocks each day depends
on the strategy and how experienced they
are and some very experienced day
traders may stick to one to two stocks
because they know those stocks very well
what they're essentially doing
successful day traders learn the
personalities or the volatility of
certain stocks under changing market
conditions and what they understand
basically what that stock does under
market conditions they can trade those
price movements and make small profits
but because they're leveraging their
money they're actually larger profits
than you would have had if you were just
buying those stocks outright so that's
basically the strategy of a day trader
and now let's talk about the success
rate of a day trader so this was from
investopedia they said that they
estimate that roughly 10 percent of day
traders are successful
and 90% are unsuccessful so they're
losing money so only 10% of day traders
actually turn a profit when their day
trading so if you're looking to get
involved in the stock market and you're
a complete beginner I would stay as far
away from day trading as possible but I
would definitely recommend learning
about the technical stock analysis and
learning about technical indicators and
learning about candlestick charts
because that's very valuable to know
that but as far as day trading and
trading at high volumes and trading in
and out of stocks within a day I would
leave that up to the professionals
because it's a very small group those
10% who are making profits doing this so
I got a couple other things I want to
look at here so this would be people who
fall over the successful day trading
category the 10% these people study the
personality of a stock or a few stocks
they identify a exit and entry points
they execute in a sophisticated trading
platform they watch multiple technical
indicators to predict price movements
they sell as soon as they reach the
planned exit point they also cut losses
as soon as possible and they trade
without emotion okay now as far as the
90% go which is the majority of us or
the unsuccessful day traders these
people generally will trade any stock so
they don't have a criteria when it comes
to day trading they will buy on impulse
and sell out of fear they watch too many
indicators so they're keeping track of
way too much and they fall into
information overload or weather finding
information conflicting with other
information they're looking at they also
will have no plan for the trade so they
will plan an exit point they don't plant
a stop-loss point they just buy it and
go okay hopefully it goes up and that's
where they end up losing a lot of money
because they don't set that point to
just cut your losses and call it a day
they will ride winners into losers out
of greed so they'll be up on investment
and they'll say well maybe you'll go up
more tomorrow they'll hold the stock
overnight and after hours maybe it goes
down so they don't have a plan like a
successful day trader does and they also
largely trade based on emotion and then
the last thing I want to look at I
actually have the SEC slash FINRA rules
regarding day trading because there are
a few things that you have to know so
basically the Securities and Exchange
Commission refers to day traders as
pattern of day traders so I'm reading
that this is right off the SEC gov
website so you guys
find us on your own if you're looking
forward but FINRA rules define pattern
day trader as any kind of any customer
who executes four or more day trades
within five business days provided that
the number of day trades represents more
than six percent of the customers total
trades in the margin account for Nassim
five business days
this rule represents a minimum
requirement and some broker dealers use
a slightly broader definition in
determining whether a customer qualifies
as a pattern day trader customers should
contact their brokerage firm to
determine whether their trading
activities will cause them to be
designated as a pattern day trader now a
broker dealer may also designate a
customer at the pattern day trader if it
knows or has reasonable basis to believe
that a customer will engage in pattern
day trading for example if a customer's
broker dealer provided day trading day
trading training to such customer before
opening the account the broker dealer
could designate that customer as a
pattern day trader and what this means
is that under federal rules customers
who are deemed pattern day traders must
have at least $25,000 in their accounts
and can only trade in a margin account
so that's what we said here before
they're trading in marking accounts as a
day trader and that it says for more
information on pattern day trader on
pattern day traders and related FINRA
margin rules please read the SEC steps
investor bulletins margin rules for day
trading and I'm not going to get into
that I just wanted to point that out
that if you're labeled as a pattern day
trader you have to have the minimum of
$25,000 in your trading account and you
have to trade inside a margin account so
make sure if you do plan on day trading
you talk to your brokerage firm in
advance and make sure you're following
all the rules anyways guys that's pretty
much all I got for this video if you
enjoyed it please take a second and drop
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drop me a comment below with any
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future uploads and as always I thank you
guys for watching this video
you
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