Day Trading Firms

As the name implies, day trading firms buy and sell stocks and other financial instruments within the course of one twenty four hour period with the hope of quick and easy profits. There are banks and investment agencies that specialize in this type of activity. But there are also individuals who are able to engage in this method of money management on their own thanks to Internet technology. The way that this works is relatively simple. A stock may be purchased early in the hope that it will rise in value as the day progresses. By the end of the day, the trader will sell the stock, hopefully at a quick profit. However, day trading firms may be operating on very thin ice. Borrowed funds may be used to purchase these stocks. If a stock drops in value, the borrowed money will be lost when the stock is sold at the end of the day. The result may be quick profits, but could just as easily be large losses, so the risk to investors is very real. There is nothing illegal about this type of investment activity and it is considered perfectly ethical. Any trader who invests in this way should be prepared to suffer losses. Funds that are risked should be limited to only what an investor can truly afford. Money that is needed for everyday expenses should never be put to this kind of use.

Since money that is used to purchase these financial instruments is borrowed, there can be many risks involved. Day trading firms are not acting as investors in the strictest sense of the word. To invest in something is to show faith over the long haul. These extremely short term investments will generally evaporate into a sale before the sun sets and the market closes. Anyone who is interested in entering this area of investing should know that day trading can be an extremely stressful job. With multiple purchases to track, a trader must be able to concentrate and remain on their toes all day long. It is not as simple as purchasing a few stocks and sitting back to watch what happens next. The market can change very quickly and anyone who takes their eye off the ball for even a moment can sustain large losses. Timing is crucial. The trader must know when to pull the trigger on a particular purchase if that trader is to be successful. Expenses for day trading firms can be relatively high as well. Since so many of these purchases are made on borrowed money an unskilled trader may find that they are in a financial hole very quickly. With such high risks, some view these practices as a form of gambling. Rather than hanging on to a variety of stocks over a period of time, a day trader's objective is to buy low and sell high. The phrase day trader has earned something of a spotty reputation, therefore some individuals prefer the name market timer or swing trader.

Some day trading firms attempt to lure in clients with unrealistic promises of fast profits and minimal risks. In most cases, investors should beware. Before turning over hard earned cash, a potential client should check out the track record of any firm. How much money have they made for their clients? How much have they lost? If this information is not available, a client should move on. There are also many websites that offer advice and investing tips to at home traders. This advice should be taken with a grain of salt to say the least. In addition, seminars, books, and courses on how to succeed in this risky area are widely available. The information in these resources may or may not be considered objective, however. A state securities regulator will usually be able to make recommendations and give information on day trading firms. Trading agencies are required to register with the SEC in whatever state they are conducting business in. The SEC should be able to inform the potential client if there have been problems with a particular firm. The North American Securities Administrators Association can provide interested parties with the telephone number of the appropriate state securities regulator. A wise consumer will take steps to locate a reputable firm that can provide counseling on less risky financial management.

One method that is used by day trading firms is that of news playing. This practice involves the quick purchase of stocks that have just revealed some kind of good news or rapidly selling stocks that have just posted bad news. In some cases, this news can be nothing more than unsubstantiated rumors. The skill of the individual trader may hinge on the quality of advice adhered to. The importance of wise and ethical advice is explained in the Bible. "Blessed is the man that walketh not in the counsel of the ungodly, nor standeth in the way of sinners, nor sitteth in the seat of the scornful." (Psalm 1:1)

For anyone who is determined to seek success through day trading firms, there are a few requirements. The first major requirement is the availability of a large amount of money that can be put at risk. Establishing iron clad limits and rules and sticking to those limits and rule is also essential. The odds of success can be very steep, but it is not impossible. There are individuals who have had success with this method of financial management. But anyone who attempts such short term investments should only do so when they fully understand the risks involved.