Day trading is a stock-buying option that involves buying and selling securities within a single business day. Oftentimes, traders borrow money and purchase highly liquid indexes or stocks. Then, they sell these off by the end of the day.

Principle #1: Buy Low and Sell High

In order to make a profit during day trading, it is essential that you buy stocks at a low price and then sell them for a profit. While you should strive to make the most that you can, remember that you may not make as much day trading as you would investing in a growing stock for a month.

Principle #2: Choose One or Two Markets

Day trading is something that you will become more successful at if you concentrate your area in just one or two markets. When you do this, you become familiar with the idiosyncrasies and subtleties of your chosen markets. This allows you to make more profitable decisions in the future.

Principle #3: Know that Your Returns May Be Small

Some day traders get discouraged because they do not see returns the size that you would when investing in a stock with a high return rate. High return rates on day trades are much smaller because you are only holding your position in the market for a day.

Principle #4: You Will Make at Least the Risk-Free Rate of Return

When you practice day trading, you make at least the risk-free rate of return. This is your compensation for giving up the amount of money you have from the deal. Usually, you will earn back a minimum percentage for giving up your money for the day. This percentage is your profit and it is known as the risk-free rate of return.

Principle #5: The Time Value of Money Affects Your Profits

The reason that you make money in addition to the risk-free rate of return when day trading is because of inflation. Even over the course of a day, the value of money has time to change. This is often caused by inflation. The time value of money also affects your compensation because you are giving up the use of your money for a short period of time.

Principle #6: You Can Increase the Amount in Your Account to Increase Profit

Day traders often have an account on a trading website, or at the very least, a place where their money and the corresponding profit is held. When you allow someone to borrow money for a percentage of profit, you can increase your earnings by adding more money to your account.

Principle #7: Day Trading is Predictable Except in Times of Crisis

There are people known as regulators who watch the market, being sure that it does not fall into crisis. In the case that it does, trading stops. This is done following the rules of circuit breakers and the Dow Jones Industrial Average. When the average falls by at least ten percent, day trading is stopped for an hour. When it falls by at least twenty percent by 1 p.m., it stops for two hours. If it falls this much by 2 p.m. it stops for the day. Finally, if the average ever falls by thirty percent or more, trading stops for the day.

Day trading really isn’t too complex once you know what you are doing. Follow these basic principles of day trading to help get yourself started making money. Though, if you are still having trouble, companies like InvestFly, offer a community section on their website, where users can post investing related material and interact with one another.  Joining a site that offers this feature can aid you in your trading and other investment opportunities.