Mainly there are two types of day traders.
1.Scalp trading ( small profit takers)
2.Momentum trading.
1. Scalp trader
These type of traders do multiple trades in a day with very small
profits. They do buying and selling on various stocks with very
small profits.
In this type of trading there is less risk as compared to momentum
trading.
2. Momentum trading
In this, trader buys the stock and wait for the target to hit inserting
stop loss as a precaution if in case market goes against your trade.
In other words he waits for good profit percentage and not for
small profit.
This type of trading is risky because market directions can reverse
at any time without any intimation so in such situations your stop
loss may trigger.
So as conclusion, if you don’t want to take risk then one should go for scalp trading where you will get good profit also.
If you are very sure about market direction and your stock direction then you can go for momentum trading.
Day trading stocks
In day trading, traders mostly wish to do buying and selling on small profits or else they look for overbought or oversold stocks.
Types of Intraday Trading
Taking into consideration these important points following basic things you should look in for stocks while choosing them for day trading.
i) Price Volatility
ii) Volume (quantity)
What exactly these terms mean and how to use them while Day Trading.
Price Volatility
The Price volatility means the movement (up and down) of stock price should be more (or high) through out the day. In other words the fluctuation in stock prices should be on high rate so that it will be easy for you to buy and sell on different prices. Suppose if stock is moving up and down in very narrow range then on what price you will buy and sell? So it is always better if you choose stocks which have high volatility in price movement.
Volume (quantity)
Volume means trading quantities. The stocks which you choose for day trading should have high volumes (or high traded quantity).
Why this is required?
The high volume indicates that there is more liquidity. Liquidity means lots of transactions had took place on this stock and more people are interested to trade in this stock. This will ease your trading job because you will get more exposure to the price to buy and sell at anytime. Due to high volumes there will be also high price fluctuations.
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