Deciding What and When to Buy

 What to Buy

Day traders seek to make profit by taking advantage of the smallest price fluctuations in individual assets (stocks currency, currencies, futures and even options). They typically utilize huge amounts of capital to accomplish this. In deciding which stock to buy, a stock for example, a common day trader will look for three aspects:

Liquidity. Liquidity permits you to purchase and sell it with ease and hopefully at a fair price. Liquidity can be a benefit with small spreads which is the gap between the price of the bid and price prices of a security and also for the low slippage which is an amount that is different between anticipated price of a transaction and the actual value. (Hassanworld)

Volatility. It is a measurement of daily prices range - the interval within which a trader works. Greater volatility implies greater opportunity to make or lose money.

Trading volume. This is the frequency at which an investment is purchased and sold during a particular time frame. It's also known by the term average daily volume of trading. A high volume suggests a high level of attention to a stock. An increase in the volume of a particular stock can be an indication of a price rise upwards or downwards.

When to Buy

Once you've identified what stock (or any other asset) you'd like to trade, you'll need to determine starting points to trade. Tools that can assist you to accomplish this include:

News services that are real-time: News moves stocks therefore it's crucial to join services that will notify you whenever possible market-moving news breaks.

ECN/Level 2 quotations ECNs, or electronic communication networks are systems that use computers to provide the most competitive bid and ask prices from various market participants. They afterwards, automatically match and complete orders. Level 2 is a subscription-based system that gives you real-time access to an online version of the Nasdaq orders book. It is the Nasdaq orders book includes prices of the market maker in each Nasdaq listed and OTC Bulletin Board security. 4. When combined, they provide you with an understanding of how orders are executed in real-time.

Intraday chart with candlesticks: Candlesticks offer a basic understanding of price movement. More details on these charts will follow later.

Write down the exact conditions under which you'll be entering the position. For example, buying during an uptrends isn't sufficiently specific. Try an alternative that's more exact and measurable: Buy when price is over the top the trendline of the triangular pattern in which the triangle occurs before an upward trend (at at least at a higher than the swing high and a higher lower swing low before the triangle was formed) on the chart for two minutes within the early hours of trading.

After you have established a set of entry requirements look at other charts to determine if your conditions are being triggered each day. Consider, for instance, whether patterns on the chart that are candlesticks indicate price movements in the direction you expect. If it does, you've got the potential to enter into an approach. (Hassanworld)

In the next step, you'll have to decide how you want to end your trading.

Deciding When to Sell

There are many methods to get out of a winning position that include the trailing stop or target profits. Targets for profit are perhaps the most commonly used method of exit. They are a way of taking profits at a certain price. The most common strategies for achieving profit targets include